Male/female differences in financial media use are discussed. Using proprietary and academic studies, current knowledge about print and electronic sources of information favoured…
Abstract
Male/female differences in financial media use are discussed. Using proprietary and academic studies, current knowledge about print and electronic sources of information favoured by upscale and downscale segments is summarised. Consumer goods retailers now entering the banking market use segmentation strategies to appeal to different male and female targets, and ways in which financial institutions can adapt retail methods to fit media uses based on segmentation by sex are suggested.
Brandon Doey and Pieter de Jong
This study investigates the relationship between earnings call sentiment and subsequent media coverage sentiment. Examining these synergistic effects between executive…
Abstract
Purpose
This study investigates the relationship between earnings call sentiment and subsequent media coverage sentiment. Examining these synergistic effects between executive communication style and resulting news narratives provides novel insights. The unscripted qualitative discussions in earnings calls establish perceptions and outlooks that the media echoes in later coverage. Understanding these intricate connections between information channels aids communication experts and market analysts in shaping strategic messaging and predicting market impacts. In addition, the link with the stock return reaction is revisited, and this study shows that the effects on stock returns driven by news information are moderated by earnings call sentiments.
Design/methodology/approach
This study analyzes the interplay between earnings call sentiments and subsequent news sentiments for 30 S&P 500 companies from 2012 to 2022. Utilizing the FinBERT Natural Language Processing (NLP) model, we extract sentiment scores from earnings call transcripts and corresponding news articles. We apply OLS regression models to examine the relationship between negative earnings call sentiments and subsequent negative news sentiments, as well as their combined impact on stock returns. Control variables include financial metrics such as ROA, ROE, firm size, Market-to-Book ratio and liquidity. The methodology allows for a nuanced exploration of sentiment transfer mechanisms in financial communication and their market implications.
Findings
Our study reveals a significant positive correlation between negative sentiment in earnings calls and subsequent negative news sentiment. A 1% increase in negative call sentiment associates with a 0.54% increase in negative news sentiment the following day, supporting Agenda Building and Impression Management hypotheses. We observe a multiplicative effect on stock returns when negative call sentiment coincides with negative news sentiment, supporting signaling theory. Financial metrics like ROE show marginal influence on news sentiment, while others demonstrate insignificant impact. These findings underscore the importance of holistic corporate communication management in mitigating potential negative market reactions.
Research limitations/implications
This study’s primary limitation is its sample size of 30 S&P 500 companies, potentially limiting generalizability. The use of a single sentiment analysis model (FinBERT) could impact results, warranting comparison with alternative methods. The study’s timeframe (2012–2022) may not capture the most recent market dynamics. Future research could expand the sample size, incorporate additional sentiment analysis techniques and explore longer-term effects. Investigating industry-specific variations and the impact of macroeconomic factors could provide further insights. Additionally, qualitative analysis of earnings call content could complement these quantitative findings, offering a more comprehensive understanding of sentiment transfer mechanisms.
Practical implications
This study offers insights for corporate communicators, investor relations professionals and financial analysts. The strong correlation between earnings call sentiment and subsequent news sentiment emphasizes the need for management of corporate messaging during these calls. Companies should be aware that negative sentiments expressed in earnings calls may amplify through news coverage, potentially impacting stock performance. Investors and analysts should consider both earnings call and news sentiments when evaluating market reactions. For regulators, these findings highlight the importance of monitoring information dissemination practices to ensure market fairness. Overall, the study underscores the significance of a holistic approach to financial communication strategy.
Social implications
This research highlights the interconnected nature of corporate communication and media narratives, emphasizing social responsibility of both corporations and news outlets. The findings suggest that negative corporate messaging can perpetuate and amplify through news coverage, potentially affecting public perception and investor sentiment. This underscores the need for transparent and ethical communication practices in the business world. The study also raises awareness about the potential manipulation of public opinion through carefully crafted corporate narratives. It encourages stakeholders to critically evaluate both corporate communications and subsequent media coverage, promoting a more informed and discerning society in the context of financial information dissemination.
Originality/value
This study uniquely explores the interplay between earnings call sentiments and subsequent news sentiments, addressing a significant gap in financial communication research. By examining the sentiment transfer mechanism from corporate messaging to media narratives, it provides novel insights into information dissemination in financial markets. The research demonstrates how negative sentiments in earnings calls can amplify through news coverage, offering valuable implications for corporate communication strategies. This multifaceted analysis contributes to a deeper understanding of the complex relationships between corporate communication, media coverage and market behavior.
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The purpose of this paper is to observe the investor relations (IR) process from the perspective of media sociologists.
Abstract
Purpose
The purpose of this paper is to observe the investor relations (IR) process from the perspective of media sociologists.
Design/methodology/approach
The focus of the piece is the changing role of the financial news media in equities markets. It is based on two lengthy periods of research into the part played by communications in investment in the London Stock Exchange. The research looked at three sets of participants and three stages of the communications process: financial public/IR and the IR function, financial journalists and news reporting, and professional investors and their evaluation processes. Much of the work involved semi‐structured interviews with over 100 high‐level participants.
Findings
The findings suggest a slow decline in the importance of financial news media in the investment process. However, financial news also continues to play a significant role in trading in the city and can, at times, still have a powerful impact on investment patterns. Consequently, all sides – companies, IR practitioners, analysts and investment managers – continue to target and consume it.
Originality/value
The paper introduces readers to theories and research methods used in the adjacent research field of media and communications.
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Ngoc Thang Doan, Dung Phuong Hoang and Anh Hoang Thi Pham
Based on the resource-based view (RBV) and the signaling theory, this paper examines the effect of media reputation on financial performance as well as the moderating role of bank…
Abstract
Purpose
Based on the resource-based view (RBV) and the signaling theory, this paper examines the effect of media reputation on financial performance as well as the moderating role of bank characteristics (risk management and financial capacities) in this relationship, using Vietnamese commercial bank data for the period 2007–2018.
Design/methodology/approach
We rely on the agenda-setting theory to measure the media reputation of banks. Return on average equity (ROE) is used as a proxy of financial performance. We regress financial performance on media reputation with fixed effects to control unobserved variables. In addition, the instrumental variable (IV) method is applied to deal with the endogeneity problem. We use the change in bank logo as an IV for media reputation.
Findings
We find that media reputation has a positive effect on financial performance. This effect becomes prominent for large banks, listed banks or banks that demonstrate good risk management capacities, and is particularly strong when we control for endogeneity bias. The effect of media reputation on financial performance is transmitted through the non-performing loan (NPL) channel.
Research limitations/implications
The research findings further endorse the positive impact of media reputation on financial performance in the low-quality institutional settings. Moreover, these findings expand the existing knowledge regarding the relationship between media reputation and financial performance by affirming two strategies which could be used to leverage the contribution of media reputation including improving banks' risk management capacities and raising financial capital.
Originality/value
This is the first known paper to examine the effect of media reputation on financial performance in commercial banks in an underdeveloped institutional setting while exploring the moderators in this relationship. This study, therefore, provides insightful implications for different bank segments in managing NPL and taking advantage of media reputation as a potential resource of financial performance.
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Radwan Hussien Alkebsee and Ahsan Habib
Drawing on the premise that the media play a vital corporate governance role, this paper aims to investigate the association between media coverage and financial report…
Abstract
Purpose
Drawing on the premise that the media play a vital corporate governance role, this paper aims to investigate the association between media coverage and financial report restatements.
Design/methodology/approach
Based on a sample of Chinese listed companies over the period 2011–2015, the authors use ordinary least squares regression as well as a number of additional tests. To mitigate the endogeneity issue, the authors use a two-stage Heckman test and a propensity score matching model.
Findings
The authors document a negative and significant association between media coverage and restatements, suggesting that firms with high media coverage engage less in financial restatements. The authors further explore the moderating effects of internal control quality and state ownership on the association between media coverage and restatements. Regression results reveal that the governance role of the media is more pronounced for state-owned enterprises than for private firms. However, no significant difference in the disciplining effect of media coverage is found for firms with high, versus low, internal control quality.
Originality/value
The role of the media in corporate governance and financial reporting quality has been well documented. In emerging economies, such a role has been overlooked. As a result, the purpose of this study is to fill that void. Furthermore, prior research ignores the impacts of state ownership and the internal control environment on the media's governance role.
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Haiyuan Yin and Meng Sun
This paper aims to enrich the scope of the influence of media reports on the stock risk, and it also provides a path to support the research on the relationship between media…
Abstract
Purpose
This paper aims to enrich the scope of the influence of media reports on the stock risk, and it also provides a path to support the research on the relationship between media reports and idiosyncratic risks in the stock market.
Design/methodology/approach
The authors select financial restatement samples of listed companies in China from Jan 2015 to Dec 2017 to explore the impact of the financial restatement on the idiosyncratic risk of stocks. Further, the financial restatement that has more media attention may play a more significant role in promoting the idiosyncratic risk.
Findings
The authors found that the financial restatement of listed companies has a significant positive effect on the idiosyncratic risk of stocks. Specifically, the idiosyncratic risk changed five months before the restatement. After the restatement, the idiosyncratic risk increased by 83.47 in five days then decreased slowly, which lasted about one year. The restatement caused by sensitive issues and legal issues has a greater impact on the idiosyncratic risk. Both current restatement and delayed restatements will increase the idiosyncratic risk of stocks, but the impact of the latter is higher than the former.
Research limitations/implications
Possible deficiencies in the paper are that the number of restatements caused by major accounting errors is low. Therefore, no regular conclusions were drawn on the impact of the financial restatement caused by major accounting errors.
Practical implications
The conclusions provide a basis for targeted supervisory measures on the restatements of listed companies. The increase in financial restatements is closely related to the lack of governance mechanisms in the stock market. For investors, although the mystery of idiosyncratic volatility exists significantly in the market, the company's valuation level will affect the relationship between the idiosyncratic risk and expected return. Investors should pay attention to the intrinsic value of the company and should not blindly pursue stocks with a low idiosyncratic risk.
Originality/value
These conclusions may enrich the scope of the influence of media reports on the stock risk and also provide a path to support the research on the relationship between media reports and idiosyncratic risks in the capital market.
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Nadine Strauss and Christopher Holmes Smith
The purpose of this paper is to research how corporate communication regarding a specific corporate event (i.e. Tesla’s tweets about a new product) as well as the framing of both…
Abstract
Purpose
The purpose of this paper is to research how corporate communication regarding a specific corporate event (i.e. Tesla’s tweets about a new product) as well as the framing of both the event itself and the market reactions therewith in the news media influence the formation of the share price of the respective company over time. In so doing, the study provides insights into the nature of market-moving information and the role of financial news flows in shaping market reactions in today’s high-frequency news and information environment.
Design/methodology/approach
Using a multi-method case study approach, combining quantitative intraday event studies with a qualitative text analysis of financial online news and tweets by Elon Musk and Twitter, the authors shed light on the complex interaction between market events, financial information and stock market reactions. The analysis covers a period of four days, encompassing the announcement and introduction of the new battery pack for Model S and X by Tesla as well as the accompanying and follow-up reporting by the financial news media.
Findings
Findings show that market reactions are driven by business events and expectations among the market rather than the follow-up reporting by financial news media. Financial online news instead seems to heavily rely on Elon Musk’s attention-triggering news to sustain its 24-h airtime with a variety of reporting tools, keeping the highly demanded audience engaged. Eventually, Twitter accounts of media visible companies and personalities, such as Tesla and its CEO Elon Musk, have been found to be useful market information sources for day traders and shareholders to trade at a profit.
Originality/value
The study is a response to recent discussions about the legitimacy of Twitter communication by CEOs or representatives of listed companies. The findings show that Twitter communication needs to be well considered in light of strict market regulations (e.g. SEC in the USA) regarding insider-trading and the publication of market-relevant information. In addition, corporate financial communication should avoid impetuous communication via social media channels as this could have deterrent effects on the market valuation of a listed company.
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This paper aims to examine the effect of Web-based financial reporting and social media platforms on the proxies of information asymmetry in the Saudi Stock Exchange.
Abstract
Purpose
This paper aims to examine the effect of Web-based financial reporting and social media platforms on the proxies of information asymmetry in the Saudi Stock Exchange.
Design/methodology/approach
The sample of this paper consists of 133 Saudi listed non-financial companies for the year 2019. Web-based disclosure level was measured using 25 items, and the social media platforms examined in this study are Facebook, Twitter and LinkedIn. The information asymmetry proxies are measured using the relative spread and the time-weighted average bid-ask spread.
Findings
The empirical results have shown that there is a negative and significant relation between Web-based financial reporting and the adoption of social media platforms and the proxies of information asymmetry. Indeed, the relative spread and the time-weighted average bid-ask spread decreased with increased Web-based reporting levels. Among three platforms (Facebook, Twitter and LinkedIn), the results show that only the use of Twitter as a channel for information disclosure has a negative and significant effect on information asymmetry proxies. Consequently, in the Saudi context, the authors demonstrate that the assumptions of the agency, stewardship and signaling theories are supported. Also, results reveal that the effect of information disclosure through websites and social media on reducing information asymmetry is stronger for large companies than small companies.
Practical implications
The paper provides new insights into the role played by websites and social media platforms in the reduction of the information asymmetry in the stock market. Consequently, investors and regulatory authorities in the Saudi financial market must give great importance to online information disclosure and its implications for lowering information asymmetry. This empirical study informs regulators in Saudi Arabia to conduct the better practice of Web-based and social media financial reporting and to regulate the current practice of information disclosure. Besides, the obtained results have the potential to convince firms’ managers to improve online information disclosure to benefit from the reduction in information asymmetry.
Originality/value
Unlike previous studies, this study investigates, simultaneously, the effect of Web-based and social media information disclosure on the proxies of information asymmetry in a developing economy. In addition, the hypotheses of this study are developed based on a set of theories (the agency, signaling and stewardship theories), to verify the applicability of these three theories in the Saudi context.
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Radnyi Godase, Jyothi P and M. Lalitha Supriya
The study aims to explore the role of media in enhancing financial knowledge, financial self-efficacy, and financial planning propensity among working adults in India.
Abstract
Purpose
The study aims to explore the role of media in enhancing financial knowledge, financial self-efficacy, and financial planning propensity among working adults in India.
Design/methodology/approach
Primary survey-based data (n = 542) were analyzed using covariance based-structural equation modeling.
Findings
Media has a positive impact on financial knowledge. Financial knowledge positively mediates the relationship between media usage and financial self-efficacy and financial planning propensity. Also, financial knowledge and financial self-efficacy positively mediate the relationship between media usage and financial planning propensity.
Originality/value
The role of media as a significant agent of consumer socialization is an under-researched area. The authors contribute to the existing literature by demonstrating the role of media in improving financial knowledge and financial self-efficacy to promote financial planning propensity among working adults.
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Nicola Del Sarto, Elisa Bocchialini, Lorenzo Gai and Federica Ielasi
This paper aims to explore the transformative influence of social media applications on the digital evolution of banks. Using a multiple case study approach, this study…
Abstract
Purpose
This paper aims to explore the transformative influence of social media applications on the digital evolution of banks. Using a multiple case study approach, this study investigates how Italian banks have adopted social media in their digital transformation. The study seeks to uncover strategies used by banks to maximise the benefits of social media platforms and assess the outcomes and challenges faced during this process. The results provide valuable insights for banks navigating digital transformation, emphasising the importance of organisational culture, client engagement, financial innovation and proactive response to fintech disruptions.
Design/methodology/approach
This study uses a multiple case study approach to investigate the influence of social media applications on the digital transformation of banks. Six Italian banks that integrated social media into their digital transformation efforts are analysed. The research examines the strategies used by these banks to effectively leverage social media platforms. The outcomes and implications of these initiatives are scrutinised to discern both positive impacts and challenges faced by banks and customers. The research methodology involves in-depth analysis of case studies, incorporating insights from managerial interviews to underscore key aspects essential for successful digital adaptation in the banking sector.
Findings
This study reveals profound impacts of digital transformation on the banking sector, emphasising key implementation areas. Insights gleaned from case studies of six Italian banks underscore the transformative influence of social media applications. Results highlight positive impacts, including enhanced customer service, engagement, financial literacy and community building. Managerial interviews underscore five critical aspects: the imperative for a new organisational culture, a focus on millennial clients, understanding and offering new financial instruments and proactive responses to challenges posed by emerging fintech companies. Successful adaptation necessitates attention to organisational culture, client engagement, financial innovation and proactive response to fintech disruptions. The findings contribute to the evolving understanding of the transformative role of social media in reshaping the banking industry.
Originality/value
This paper fills a critical research gap by delving into the challenges specific to banking institutions during the implementation of social media strategies amid digital transformation. While existing literature predominantly highlights positive impacts, this study pioneers a comprehensive exploration of unique hurdles faced by banks. The multiple case study approach, focusing on six Italian banks, contributes original insights into the strategies used to maximise social media benefits. The research provides a nuanced understanding of both positive impacts and challenges encountered, offering valuable guidance for refining social media approaches in the ever-evolving digital landscape. This contributes to the existing body of knowledge and aids banks in navigating their digital transformation journey effectively.