Friends at WSJ: Journalist Connections, News Tone, and Stock Returns

Event Date: 6 February 2019

Speaker: Guosong Xu (Otto Beisheim School of Management) 

Venue: Strathclyde Business School, Cathedral Wing,CW408

Time: 11am

Abstract:

This paper studies the effect of the firm–journalist network on news tone and stock returns. Using a unique dataset on the firm’s and the CEO’s connections to Wall Street Journal (WSJ) reporters, I find that such connections lead to markedly more favorable coverage of corporate M&A news and to better market reactions to the mergers. The effect on the financial market is larger for the deals featured on the front page of the WSJ. For identification, I instrument the connected coverage with the reporters’ turnover and find similar results. Furthermore, using Rupert Murdoch’s acquisition of the WSJ as an
exogenous shock to journalistic independence, I show that firms previously connected to Mr. Murdoch receive better coverage and more positive stock returns after the ownership change.

Published: 5 March 2019