We’re being facetious, but why not when three academics have taken 285,917 company press releases to see the impact on stock prices?
Having obtained and classified into news categories a comprehensive dataset of corporate press releases issued between April 2006 and August 2009, we analyze stock price reactions to various types of news. Besides confirming earlier findings regarding the market reaction to financial news, we document strong responses to news about corporate strategy, customers and partners, products and services, management changes, as well as legal developments. We show that return volatility increases and liquidity decreases following most news announcements. Furthermore, we find that the market response to certain types of news changed during the period of the financial crisis. For example, news that are likely to result in higher and less volatile future cash flows, such as announcements of corporate reorganization, new customers and partners, new products, FDA and European drug approvals, as well as legal settlements, led to more positive price reactions; announced plans to raise funds through equity or debt offerings were perceived less negatively; and the market reaction to announcements of share repurchases became even more positive than during the pre-crisis period.
Actually, it’s worth sharing some further random nuggets:
As for acquisitions, it has been shown that targets capture most of the value gains, and the price of acquirers, on average, declines; this decline is most pronounced for stock mergers and for large acquirers…
However, we do find that the market reacts positively to corporate decisions to shut down unprofitable operations…
Along with this chart, which shows the sensitivity of different types of news. Click to enlarge.
Related links:
Should European banking bosses keep their mouths shut? – FT Alphaville