How firms respond to external valuation: Evidence from the monitoring role of media

Abstract

This study explores how media evaluations affect corporate capital investments. I show that media evaluations of firms affect corporate capital investments via the reputation mechanism, that is, a more negative media evaluation of the firm will motivate managers to give up inefficient investments. Meanwhile, a higher quantity of news underlying news evaluation and good firm performance strengthen the positive effect of media evaluation on corporate investments, whereas a higher level of divergence of news evaluation weakens the positive effect of media evaluation on corporate investments.

Stock liquidity and tone of press releases

Abstract

This paper presents evidence that higher stock liquidity makes firms increase tone of press releases. I find that firms with higher stock liquidity have higher tone in press releases, relative to the tone of news initiated by media, than firms with lower stock liquidity. This relation is stronger for firms with greater short-term pressure, that is, with greater transient institutional ownership, greater sensitivity of manager's wealth to stock price, and more analyst coverage. This finding suggests that stock liquidity, by producing short-term pressure on firms, leads firms to boost press release tone.