The Impact of Corporate Media News on Market Valuation

Abstract

This article explores the influence of Web-based corporate reporting on the investors' valuation of companies in the information and communications technology industry. This study compiled 8,111 news items issued in the “Press Releases” tab of the firms' Web sites between January 2003 and April 2005, and analyzed what type of news items affects stock returns. The results show a positive price reaction to news regarding new customers, completion of acquisitions, strategic long-term decisions, and non-technological alliances. In contrast, the results show a negative price reaction to news regarding the launch of new or upgraded products.

Notes

¹In 1998, Deller, Stubenrath, and Weber (1999) showed that 80% of U.S. firms, 65% of U.K. firms, and 61% of German firms posted press releases on their homepages.

²The information technology industry is one of the fastest growing sectors in Europe, representing between 7% and 9% of total valued added in manufacturing and services. It has also been a strong source of job creation. In 2001, it accounted for 8% of all European Union jobs in manufacturing and services (European Commission, 2005).

³E-Business W@tch is an initiative of the European Union. Its objective is to assess the penetration of information and communications technologies and e-businesses in 15 industrial sectors within member states.

⁴For details, see Fama and French (1993).

⁵This analysis was performed for a 10-day event window on returns, without any significant change in findings.

⁶The absence of autocorrelation in the residuals for each equation of the system was analyzed using the ordinary least squares estimation and examining the autocorrelation functions of the series of residuals. The covariance matrix between the residuals for the various assets was also analyzed.

*p = .01 level.

**p = .05.

*p = .001.

**p = .005.

***p = .010.

*p = .001.

**p = .005.

***p = .010.

*p = .001.

**p = .005.

***p = .010.