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The Impact Of Financial News And Press Freedom On Abnormal Returns Around Earnings Announcement Periods In The Shanghai, Shenzhen And Taiwan Stock Markets

Author

Listed:
  • Yu-Chen WEI

    (Department of Money and Banking at the National Kaohsiung First University of Science and Technology, Kaohsiung, Taiwan.)

  • Yang-Cheng LU

    (Department of Finance at Ming Chuan University, Taipei, Taiwan.)

  • I-Chi LIN

    (Chailease Finance Co. Ltd.)

Abstract

We set out in this study to examine the impact of news sentiment and press freedom on cumulative abnormal returns (CARs) around earnings announcement periods; our focus is on the stock markets of Greater China, comprising of the Shanghai, Shenzhen and Taiwan stock markets. The news sentiment ratio is calculated using content analysis under the semantic orientation approach, with our empirical results revealing that news reports released prior to the earnings announcements made by firms have significant negative impacts on the CARs of the stocks of such firms following their announcements. We also find that press freedom may reduce the explanatory power of news reports on positive abnormal returns. The greater (lesser) the level of press freedom in a particular market, then the weaker (stronger) the level of information asymmetry, which can lead to a reduction (increase) in the risk premium, ultimately resulting in lower (higher) CARs.

Suggested Citation

  • Yu-Chen WEI & Yang-Cheng LU & I-Chi LIN, 2015. "The Impact Of Financial News And Press Freedom On Abnormal Returns Around Earnings Announcement Periods In The Shanghai, Shenzhen And Taiwan Stock Markets," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 39-59, September.
    • Handle: RePEc:rjr:romjef:v::y:2015:i:3:p:39-59
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    References listed on IDEAS

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    2. Muhammad Ateeq ur REHMAN & Furman ALI & Shang XIE, 2022. "Impact of Foreign Investment News on the Return, Cost of Equity and Cash Flow Activities," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 112-127, December.

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    More about this item

    Keywords

    news sentiment; press freedom; Greater China; abnormal returns; earnings announcements;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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