The role of financial media in share repurchases

Cristian A. Pinto-Gutiérrez

Abstract


Purpose – This paper examines the impact that financial media
coverage has on share repurchase outcomes in the U.S.

Design/methodology/approach – I perform regression analysis to
examine how the volume of firm-specific news articles about the
announcements relates to firms’ decisions to actually repurchase shares
following those announcements. I also examine the role of media in the
firms’ long-term post-announcements stock performances. To alleviate
concerns about confounding effects that can simultaneously drive both
the volume of news articles and share repurchase outcomes, I use an
instrumental variable approach.

Findings – The results show that the levels of firm-specific media coverage
at the time of repurchase announcements are negatively related to firms’
actual repurchases following the announcements. Furthermore, the
evidence shows that twelve months following repurchase announcements,
the highest cumulative abnormal returns correspond to the firms with
the least media coverage. These results suggest that only those firms that
do not attract sufficient investor attention to the announcements follow
through on their repurchase programs.

Originality/value – This paper augments the literature on behavioral
finance by introducing and testing a firm-specific measure of investor
attention by employing a newly available database of news articles from a
news analytics provider. The paper also contributes to the sparse literature
that examines the effects of investor attention on corporate events.


Keywords


Investor attention; share repurchases; news analytics; media coverage.



DOI: https://doi.org/10.7819/rbgn.v18i61.2845

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