New Study Examines the Interplay Between Firms and Media in Financial Markets

March 4, 2024

The paper leverages RavenPack News Analytics to challenge the belief that media coverage is purely driven by newsworthiness.

Sasan Mansouri, Assistant Professor at the Faculty of Economics and Business - University of Groningen, explores the link between corporate communication and media coverage, and challenges the assumption that media coverage is purely driven by demand (i.e., newsworthy events). In his recent paper, "Does a Firm's Silence Drive Media Attention Away?", he focuses on the supply-side, investigating how a firm's willingness to share information influences media attention. Leveraging RavenPack News Analytics, the study unveils how a firm's communication strategy can significantly influence media attention and shape the information landscape in financial markets.

Less Transparency, Less Coverage

The study reveals compelling evidence that firms hesitant to share information during earnings calls receive significantly less media coverage, particularly from professional business media outlets. This finding contradicts the common assumption that media coverage is solely driven by the "newness" of information. Instead, Mansouri's research highlights the importance of transparency and information accessibility in shaping media attention dynamics.

The Role of RavenPack Data

Central to the study's methodology is RavenPack News Analytics which allows the author to measure the quality of the information environment surrounding firms. By quantifying the informativeness of quarterly earnings calls and assessing the level of non-answers provided by management, RavenPack data provides a comprehensive framework for analyzing the connection between firm transparency and subsequent media coverage.

figure 01
Time - trend of news coverage. This figure shows the number of media sources that published at least one piece with more than 90% relevance to the firms in the sample within two months after the firms' quarterly earnings call (left axis) as well as the total count of publications (right axis) - Source: Mansouri.

A Correlation Between Silence and Reduced Coverage

The analysis reveals a negative correlation between the number of non-answers during earnings calls and subsequent media coverage. This finding supports the supply-driven media coverage hypothesis, suggesting that firms that are less transparent receive less media attention. Additionally, the study highlights a differing impact on professional versus non-professional media sources. Professional outlets are more affected by firms' communication practices, suggesting a higher emphasis on information quality among these publications.

Exploring Future Media Coverage Research

Building upon Mansouri's work, future research can leverage evolving datasets like RavenPack News Analytics to further explore media coverage dynamics. Analyzing a broader range of firms and delving deeper into the mechanisms driving media attention can pave the way for even more nuanced insights into information dissemination within financial markets.

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