Selective publicity and stock prices.

摘要

I look at the effects of employing an investor relations (IR) firm on company media coverage and stock returns. I find that IR firms increase media coverage overall, but are able to 'spin' the news by securing disproportionately greater media coverage of the company's positively toned press releases. Moreover, this positive media coverage appears to affect prices. Around non-earnings announcements, IR firms are able to successfully spin their clients' news coverage, and returns are significantly higher. Around earnings announcements, which are more anticipated and easier to interpret, IR firms show no ability to spin the news, and returns are significantly lower. This is consistent with greater positive media coverage increasing prices by increasing expectations of future profitability, leading to disappointment around releases of hard earnings information. Using data on geographical and historical links to newspapers, as well as turnover among reporters connected to particular IR firms, I show evidence that these effects are causal.