Selective Publicity and Stock Prices



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    • Solomon is with the University of Southern California, Marshall School of Business. I would like to thank my committee chair, L̆ubos̆ Pástor, as well as committee members Toby Moskowitz, Richard Thaler, and Luigi Zingales for their extensive assistance. I am also particularly grateful to Eugene Soltes for generously providing the news data, and for numerous discussions about it. This paper has benefited from helpful comments and suggestions from Cam Harvey (the Editor), the Associate Editor, and an anonymous referee, as well as Daniel Carvalho, Arjun Chakravarti, John Cochrane, Stefano DellaVigna, Wayne Ferson, Andrea Frazzini, Sam Hartzmark, Chris Hrdlicka, Chris Jones, Roni Kisin, Christian Leuz, Asaf Manela, Atif Mian, Alan Moreira, Adair Morse, Shastri Sandy, Paola Sapienza, John Scalf, Greg Solomon, Andreas Stathopoulos, and seminar participants at Chicago Booth, Emory University, the University of British Columbia, the University of New South Wales, The University of Rochester, and the University of Southern California. All remaining errors are my own. Research support from the Katherine Dusak Miller Ph.D. Fellowship in Finance is gratefully acknowledged; any opinions expressed herein are the author's.


I examine how media coverage of good and bad corporate news affects stock prices, by studying the effect of investor relations (IR) firms. I find that IR firms “spin” their clients' news, generating more media coverage of positive press releases than negative press releases. This spin increases announcement returns. Around earnings announcements, however, IR firms cannot spin the news and their clients' returns are significantly lower. This pattern is consistent with positive media coverage increasing investor expectations, creating disappointment around hard information. Using reporter connections and geographical links, I argue that IR firms causally affect both media coverage and returns.