Market Reaction to Corporate Press Releases

Andreas Neuhierl, Anna D. Scherbina, Bernd Schlusche
2010 Social Science Research Network  
We classify a unique and comprehensive dataset of corporate press releases into topics and study the market reaction to various types of news. While confirming prior findings regarding strong stock price responses to financial news, we also document significant reactions to news about corporate strategy, customers and partners, products and services, management changes, and legal developments. Consistent with regulators' expectations, the level of informational asymmetry in the market declines
more » ... he market declines following most types of press releases. At the same time, return volatility frequently increases in the post-announcement period, which we show can be attributed to higher levels of valuation uncertainty. JEL classification: G01, G10, G14, G30 ABSTRACT We classify a unique and comprehensive dataset of corporate press releases into topics and study the market reaction to various types of news. While confirming prior findings regarding strong stock price responses to financial news, we also document significant reactions to news about corporate strategy, customers and partners, products and services, management changes, and legal developments. Consistent with regulators' expectations, the level of informational asymmetry in the market declines following most types of press releases. At the same time, return volatility frequently increases in the post-announcement period, which we show can be attributed to higher levels of valuation uncertainty. JEL classification: G01, G10, G14, G30 event-study approach to measuring innovative output: The case of biotechnology, American Economic Review 83, 253-258. Bajaj, Mukesh, and Anand M. Vijh, 1995, Trading behavior and the unbiasedness of the market reaction to dividend announcements, Journal of Finance 50, 255-279. Ball, Ray, and S. P. Kothari, 1991, Security returns around earnings announcements, Accounting Review 66, 718-738. 33 Bamber, Linda Smith, Orie E. Barron, and Thomas L. Stober, 1997, Trading volume and different aspects of disagreement coincident with earnings announcements, Accounting Review 72, 575-597.
doi:10.2139/ssrn.1556532 fatcat:zma5hzzicbh2vjv75cxz7brgxq