Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Save to My Library
Look up keyword
Like this
2Activity
0 of .
Results for:
No results containing your search query
P. 1
Market Reaction to Corporate Press Release

Market Reaction to Corporate Press Release

Ratings: (0)|Views: 1,388 |Likes:
Published by Smith Kim

More info:

Published by: Smith Kim on Jul 19, 2012
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

07/19/2012

pdf

text

original

 
Electronic copy available at: http://ssrn.com/abstract=1556532
Market Reaction to Corporate Press Releases
Andreas Neuhierl
Northwestern University 
Anna Scherbina
UC Davis 
Bernd Schlusche
Federal Reserve Board 
This version: October 31, 2011
ABSTRACT
We classify a unique and comprehensive dataset of corporate press releases into topicsand study the market reaction to various types of news. While confirming prior find-ings regarding strong stock price responses to financial news, we also document signifi-cant reactions to news about corporate strategy, customers and partners, products andservices, management changes, and legal developments. Consistent with regulatorsexpectations, the level of informational asymmetry in the market declines followingmost types of press releases. At the same time, return volatility frequently increasesin the post-announcement period, which we show can be attributed to higher levels of valuation uncertainty.
JEL classification:
G01, G10, G14, G30
Keywords:
Corporate News, Event Study, Market Efficiency
Address: Kellogg Graduate School of Management, Northwestern University, Evanston, IL 60208. E-mail:
a-neuhierl@kellogg.northwestern.edu.
Address: Graduate School of Management, University of California, Davis, One Shields Avenue, Davis, CA 95616. E-mail:
ascherbina@ucdavis.edu.
Phone: (530) 754-8076. Fax: (530) 725-2924.
Address: Board of Governors of the Federal Reserve System, Washington, DC 20551. E-mail:
bernd.schlusche@frb.gov.
The views expressed in this paper are those of the authors and not necessarily those of the Board of Governors, other membersof its staff, or the Federal Reserve System.
 
Electronic copy available at: http://ssrn.com/abstract=1556532
Market Reaction to Corporate Press Releases
ABSTRACT
We classify a unique and comprehensive dataset of corporate press releases into topicsand study the market reaction to various types of news. While confirming prior find-ings regarding strong stock price responses to financial news, we also document signifi-cant reactions to news about corporate strategy, customers and partners, products andservices, management changes, and legal developments. Consistent with regulatorsexpectations, the level of informational asymmetry in the market declines followingmost types of press releases. At the same time, return volatility frequently increasesin the post-announcement period, which we show can be attributed to higher levels of valuation uncertainty.
JEL classification:
G01, G10, G14, G30
Keywords:
Corporate News, Event Study, Market Efficiency
 
I. Introduction
On January 9, 2007, Apple Inc. issued a press release, headlined “Apple Reinvents the Phonewith iPhone,” which stated:“iPhone ... ushers in an era of software power and sophistication never beforeseen in a mobile device, which completely redefines what users can do on theirmobile phones.”It contained a pronouncement from CEO, Steve Jobs, that “... iPhone is a revolutionary andmagical product that is literally five years ahead of any other mobile phone,” and describedthe new product’s features. On the day of the announcement, the stock trading volumeincreased more than four-fold and remained almost as high on the following day beforedropping by half the day after that. The stock price also rose, and in the period from theday before to five days after the announcement Apple’s stock earned a cumulative return of 9.31% in excess of the market. Moreover, the stock became much more volatile: In the 10days following the press release its idiosyncratic volatility increased by 28% relative to thelevel in the 10 days prior to the announcement.Following the adoption of Regulation Fair Disclosure (Reg FD) in October 2000 and of theSarbanes-Oxley Act (SOX) in July 2002, corporate press releases became a prevalent methodof communicating new developments to investors. These regulations mandate that publiclytraded companies disclose all private information that may have an impact on their marketvalues and report changes in their “financial conditions or operations” in a timely fashionand simultaneously to all market participants. In particular, Reg FD states: “With advancesin information technology, most notably the internet, information can be communicated toshareholders directly and in real time, without the intervention of an intermediary.”
1
Reg FDfurther suggests that communicating information via press releases should be the preferredmeans of achieving timeliness and non-exclusivity.Corporate press releases reach investors almost instantaneously via services such as PRNewswire, BusinessWire, GlobeNewswire, Marketwire, and the like.
2
We form our dataset
1
The entire document can be found at
.
2
Firms usually sign up for an account with one of the newswire services, and issue all of their press releasesthrough that service. Typically, a basic account is free but a fee is charged for each press release. Newswire
1

You're Reading a Free Preview

Download
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->