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The role of bad-news coverage and media environments in crash risk around the world

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  • Liu, Qigui
  • Tang, Jinghua
  • Li, Donghui
  • Xing, Lu

Abstract

Employing a large international sample across 34 countries, we find that media coverage of bad news reduces firms’ future stock price crash risk. This effect is strengthened when the country-level trust in news media and press freedom is high. Bad-news coverage not only conveys price-sensitive information that directly alleviates managers’ bad-news hoarding, but also disciplines managers’ opportunistic activities, such as earnings management and risk-taking, which in turn impedes the hoarding of bad news. Furthermore, the negative effect of bad-news coverage on future crash risk intensifies during the global financial crisis and weakens following the adoption of International Financial Reporting Standards.

Suggested Citation

  • Liu, Qigui & Tang, Jinghua & Li, Donghui & Xing, Lu, 2023. "The role of bad-news coverage and media environments in crash risk around the world," Journal of Empirical Finance, Elsevier, vol. 72(C), pages 488-509.
    • Handle: RePEc:eee:empfin:v:72:y:2023:i:c:p:488-509
    DOI: 10.1016/j.jempfin.2023.04.007
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    More about this item

    Keywords

    Bad-news coverage; Trust in news media; Press freedom; Crash risk;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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