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The Impact of Corporate Governance Press News on Stock Market Returns

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Listed:
  • Alessandro Carretta
  • Vincenzo Farina
  • Duccio Martelli
  • Franco Fiordelisi
  • Paola Schwizer

Abstract

Stock market prices reflect information regarding firms’ business environments, operations and, in general, their fundamentals. Recently, various studies have analysed the link between news coverage and stock prices but no evidence exists on how channels and ways of communication of information affect investors’ behaviour. We analyses these aspects focussing on a large sample of corporate governance news published between 2003 and 2007 in ‘Il Sole 24 Ore’, Italy's major financial newspaper. We show that before news is made public investors are only able to assess the type of corporate governance event underlying it. After publication, investors are influenced by the content (positive or negative) and the tone of communication (strong or weak) of the news.

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  • Alessandro Carretta & Vincenzo Farina & Duccio Martelli & Franco Fiordelisi & Paola Schwizer, 2011. "The Impact of Corporate Governance Press News on Stock Market Returns," European Financial Management, European Financial Management Association, vol. 17(1), pages 100-119, January.
    • Handle: RePEc:bla:eufman:v:17:y:2011:i:1:p:100-119
    DOI: 10.1111/j.1468-036X.2010.00548.x
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    3. Al-Augby Salam & Majewski Sebastian & Majewska Agnieszka & Nermend Kesra, 2014. "A Comparison Of K-Means And Fuzzy C-Means Clustering Methods For A Sample Of Gulf Cooperation Council Stock Markets," Folia Oeconomica Stetinensia, Sciendo, vol. 14(2), pages 19-36, December.
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    5. Matteo Cinelli & Valerio Ficcadenti & Jessica Riccioni, 2021. "The interconnectedness of the economic content in the speeches of the US Presidents," Annals of Operations Research, Springer, vol. 299(1), pages 593-615, April.
    6. Marco Caiffa & Vincenzo Farina & Lucrezia Fattobene, 2021. "CEO Duality: Newspapers and Stock Market Reactions," JRFM, MDPI, vol. 14(1), pages 1-18, January.
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    10. Carlini, Federico & Cucinelli, Doriana & Previtali, Daniele & Soana, Maria Gaia, 2020. "Don't talk too bad! stock market reactions to bank corporate governance news," Journal of Banking & Finance, Elsevier, vol. 121(C).
    11. Alves, Paulo & Couto, Eduardo Barbosa & Francisco, Paulo Morais, 2016. "Executive pay and performance in Portuguese listed companies," Research in International Business and Finance, Elsevier, vol. 37(C), pages 184-195.
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    13. Matteo Cinelli & Valerio Ficcadenti & Jessica Riccioni, 2020. "The interconnectedness of the economic content in the speeches of the US Presidents," Papers 2002.07880, arXiv.org.
    14. Ferdinand Graf, 2011. "Mechanically Extracted Company Signals and their Impact on Stock and Credit Markets," Working Paper Series of the Department of Economics, University of Konstanz 2011-18, Department of Economics, University of Konstanz.
    15. Angelos J. Doukas & Jie (Michael) Guo & Herbert Y. T. Lam & Sarah (Hong) Xiao, 2016. "Media Endorsements of New Product Announcements: A New Marketing Strategy," European Financial Management, European Financial Management Association, vol. 22(3), pages 394-426, June.
    16. Carlos Francisco Alves & Ana Luísa Nogueira Parada Ferreira e Silva, 2018. "Coverage news and companies’ stock abnormal returns," FEP Working Papers 608, Universidade do Porto, Faculdade de Economia do Porto.
    17. Yasmeen Idilbi-Bayaa & Mahmoud Qadan, 2022. "Tell Me Why I Do Not Like Mondays," Mathematics, MDPI, vol. 10(11), pages 1-22, May.
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    19. Sturm, Philipp, 2013. "Operational and reputational risk in the European banking industry: The market reaction to operational risk events," Journal of Economic Behavior & Organization, Elsevier, vol. 85(C), pages 191-206.
    20. Xu, Yingying & Lien, Donald, 2022. "Which affects stock performances more, words or deeds of the key person?," International Review of Financial Analysis, Elsevier, vol. 84(C).
    21. Bai, Chenjiang & Duan, Yuejiao & Fan, Xiaoyun & Tang, Shuai, 2023. "Financial market sentiment and stock return during the COVID-19 pandemic," Finance Research Letters, Elsevier, vol. 54(C).
    22. María Gutiérrez & Nino Papiashvili & Josep A. Tribó & Antonio B. Vazquez, 2020. "Managerial incentives for attracting attention," European Financial Management, European Financial Management Association, vol. 26(4), pages 896-937, September.
    23. Zhang, Xiaotao & Li, Guoran & Li, Yishuo & Zou, Gaofeng & Wu, Ji George, 2023. "Which is more important in stock market forecasting: Attention or sentiment?," International Review of Financial Analysis, Elsevier, vol. 89(C).

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