Spreading The Word: Capital Market Consequences of Business Press Coverage of Management Earnings Guidance

This study investigates the role of the business press in disseminating management earnings guidance news to capital market participants. Using a unique sample of over 55,000 articles that relate specifically to management guidance, I find that 48 percent of all guidance receives coverage in the business press, with substantial within-firm variation. I then identify firm and guidance characteristics that are associated with the likelihood that guidance receives press coverage. Controlling for the endogeneity of press coverage, I find that dissemination in the press has a significant impact on the market reaction to guidance, and this effect is economically large. This study is the first to provide evidence that there is systematic variation in the extent to which guidance news is disseminated through the press, and that this variation has a significant effect on the market consequences of guidance.