The impact of news media coverage on voluntary disclosure

Abstract

This study investigates whether and how firm-specific news media coverage affects corporate voluntary disclosure. I predict that media coverage influences managers' disclosure decisions by directing investor attention toward firms and increasing investor demand for firm information. I find that managers are more likely to issue earnings guidance if their recent earnings guidance receives more media coverage. The relation between media coverage and guidance issuance is stronger for news articles that purely disseminate information quickly and are published by news outlets that target institutional investors. Consistent with my hypothesis that media coverage influences investor demand for information, I find evidence that media coverage of guidance positively relates to subsequent institutional information search activity, which in turn positively relates to future guidance issuance. Examining sources of plausibly exogenous variation in media coverage, I find further corroborative evidence of a positive relation between media coverage and earnings guidance. Overall, these analyses indicate that the news media influence managers' provision of voluntary disclosure.