Corporate communication and media coverage of abnormal returns - evidence from the Portuguese capital market

摘要

Purpose - Investor relations literature reports that after an era that "the higher the stock price, the better", currently investor relations entered into a new era where "overvaluation is perhaps as bad as undervaluation" (Laskin, 2018a, p. 19). This paper searches for evidence on whether news coverage around abnormal returns indicates that corporate communication effectively seek fair value prices. Design/methodology/approach - Using data of the Portuguese market, it investigates if the news coverage and the investor relations' influence on such coverage (namely as a source of the news) are symmetrical before and after extreme abnormal positive or negative returns. This paper uses event study methodology, performs content analysis and applies statistical and econometric analyses. Findings - The findings are consistent with the idea that companies communicate differently in face of positive and negative abnormal returns. Particularly, before the event, companies are more frequently cited as a source of the news for positive events. This indicates that companies seek to capitalize the positive impact of the favourable subsequent disclosures. After the occurrence of abnormal returns, companies are more often a source of the news for negative cases, seeking to mitigate their impact. Additionally, after negative events companies are more frequently mentioned in the news with a positive content than they are mentioned before. Social implications - The new approach of this study allows the companies' information stakeholders (namely investors and regulators) to become more informed and critical in the analysis of news coverage and its sources. Originality/value - As far as the authors of the paper know, this is the first study that addresses the question of eventual asymmetric behaviour of companies' communication in face of positive and negative abnormal returns.