Bad News Bearers: The Negative Tilt of Financial Press

We show the financial press is more likely to cover firms with deteriorating performance. Specifically, we show greater media coverage foreshadows declines in firms’ profitability and negative earnings surprises. Similarly, we find the media is more likely to cover firms’ earnings announcements if they convey poor operating performance, suggesting the media tilts its selection process toward negative news. We estimate the size of the tilt in media coverage and find that, controlling for the content of news, a news story is approximately 22 percent more likely to be covered if it is negative. Greater media coverage also negatively forecasts future returns, primarily among firms with low return volatility and those receiving non-routine coverage, suggesting that media coverage conveys novel negative information. Given the important role financial media plays in capital markets, a central contribution of this paper is in showing that the media tilts its selection process toward negative news. JEL Classifications: G10, G11, G12, G14, M40, M41 ∗We thank seminar participants at York University for their helpful comments. Emails: [email protected] and [email protected] Bad News Bearers: The Negative Tilt of Financial Press 1