Abstract
Employing a large international sample across 34 countries, we find that media coverage of bad news reduces firms’ future stock price crash risk. This effect is strengthened when the country-level trust in news media and press freedom is high. Bad-news coverage not only conveys price-sensitive information that directly alleviates managers’ bad-news hoarding, but also disciplines managers’ opportunistic activities, such as earnings management and risk-taking, which in turn impedes the hoarding of bad news. Furthermore, the negative effect of bad-news coverage on future crash risk intensifies during the global financial crisis and weakens following the adoption of International Financial Reporting Standards.
| Original language | English |
|---|---|
| Pages (from-to) | 488-509 |
| Number of pages | 22 |
| Journal | Journal of Empirical Finance |
| Volume | 72 |
| Early online date | 25 Apr 2023 |
| DOIs | |
| Publication status | Published - 30 Jun 2023 |
Funding
Qigui Liu acknowledges the financial support from the Ministry of Education, Humanities and Social Science Research Project of China (Project No.: 21YJA790038). Donghui Li acknowledges the financial support from the National Natural Science Foundation of China (Grant No.: 71873058).
Keywords
- Bad-news coverage
- Crash risk
- Press freedom
- Trust in news media
ASJC Scopus subject areas
- Economics and Econometrics
- Finance
