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Do media message receivers asymmetrically react to non-strategic and strategic media coverage? Evidence from Hong Kong

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  • Fung, Michael K.
  • Cheng, Louis T.W.
  • Shen, Jianfu

Abstract

This study decomposes media coverage into a non-strategic (random news) component and a strategic component backed by investor relations (IR) activities. Conceptually, media message receivers, including analysts and investors, asymmetrically react to non-strategic and strategic media coverage if their reactions to strategic media coverage are biased. Therefore, their reactions to non-strategic media coverage provide a benchmark of unbiased actions for empirically identifying the upward bias, if any, in their reactions to strategic media coverage. Using a sample of Hong Kong firms that provides unique data on IR activities, this study finds that analyst following and forecast error are unbiased in response to strategic media coverage. However, investors’ actions are biased upward in response to strategic media coverage, whose positive impact is over 50% stronger than that of non-strategic media coverage on stock performance and institutional ownership. Moreover, investors heavily discount the strategic media coverage of firms with high information asymmetry.

Suggested Citation

  • Fung, Michael K. & Cheng, Louis T.W. & Shen, Jianfu, 2024. "Do media message receivers asymmetrically react to non-strategic and strategic media coverage? Evidence from Hong Kong," Research in International Business and Finance, Elsevier, vol. 70(PA).
    • Handle: RePEc:eee:riibaf:v:70:y:2024:i:pa:s0275531924001284
    DOI: 10.1016/j.ribaf.2024.102335
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    More about this item

    Keywords

    Non-Strategic media coverage; Strategic media coverage; Investor relations; Biased receiver actions;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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