Managing the media coverage: evidence from managers’ stock selling

ABSTRACT

This paper investigates whether the insiders strategically manage the disclosure and timing of media coverage to maximize their trading profits. Using a sample of Chinese A-listed firms during the period of 2008–2017, we find that when top managers intend to sell their shares, they would increase the media coverage in the early stage to pull up the stock price based on the self-interest motivation. That’s to say, the media attention on the focused firms represents a significant increase during the selling period and decreases largely after the selling is completed. In addition, the association is mitigated in SOEs and firms belonging to more competitive industries. We also find that there are significant positive cumulative abnormal returns during the selling period while negative ones after the event. Our findings suggest that managers could intentionally manage the media during important corporate events for their own benefits at the cost of minority shareholders.

KEYWORDS:

• Managers’ stock selling
• strategic media disclosure
• media coverage
• agency problems

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Our definition of management selling includes both managers and their relatives that have sold their shares in the sample period. We label it as management selling in the following content.

2. In the robustness check, we also use the other sources of new reports, such as newspapers, to capture the media coverage.

3. Specifically, t= −1,0,1, which stands for three periods of Before Selling, Selling Period, and After Selling, See Figure 1 for more details.

4. According to the Figure1, we divide the whole process into three periods. The preliminary stage of the selling means it falls in the period of Before Selling ((−30,0), a month before the beginning of the selling). The current period stands for the period of Selling Period ((0,30), a month after the beginning of the selling).

5. These variables include analyst following (Analyst), institutional ownership (Inst), media development (M_Growth), profitability (ROA), sale growth (Sale_Growth), firm value (Size), firm age (Age) and firm leverage (Lev).

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [71472091];A Project Funded by the Priority Academic Program Development of Jiangsu Higher Education Institutions（PAPD）.