The Impact of Media Coverage on Voluntary Disclosure.

Abstract

Prior research establishes that media coverage can influence manager behavior by broadly distributing information and directing the attention of investors and other stakeholders. In this study, I investigate whether and how firm-specific media coverage affects managers' voluntary disclosure decisions. I show that prior media coverage is positively associated with the both the likelihood of issuing management guidance and the quantity of guidance issued. The relation between media coverage and guidance is stronger for firms in which investors have a greater ability to influence managers' voluntary disclosure decisions, for media coverage from more credible news sources, and for media articles that disseminate information quickly rather than provide additional commentary. Firms with more media coverage are also significantly more likely to hold earnings conference calls, speak more during conference calls, and issue more press releases. Examining plausibly exogenous variation in media coverage, including restructuring events at the Wall Street Journal, I find evidence consistent with my main results. My study suggests that media coverage affects investor demand for public disclosure and provides new insights into the influence of the media on manager behavior.