Research

Common Media Holding Companies and the Uniqueness of Business Press Content

• Co-authors: Kenneth Merkley (Indiana University), Joseph Pacelli (Harvard Business School), and Brady Twedt (Texas A&M University)

• The Accounting Review, Vol. 100, No. 1 (January 2025): 381-405

• Abstract: We examine how common media holding companies impact the uniqueness of business press content. Consistent with common media holding companies reducing the diversity of perspectives among journalists, we find that media outlets are more likely to cover the same earnings announcement and utilize more similar tone and content when they belong to a common holding company. We provide evidence that these effects are enhanced by outlet reach and economic incentives to share content. Finally, we provide evidence consistent with coverage by common media holding companies impeding price formation. Overall, our findings suggest that content within common media holding companies is less diverse, and that this may have negative implications for markets.

Working Paper: Media Sophistication and Earnings News Interpretation: Evidence from After-Hours Markets

• Co-author: Sean Wang (Southern Methodist University)

• Under review

• Abstract: This paper examines how media sophistication shapes how financial journalists interpret early market signals when covering firms’ earnings announcements. Using after-hours releases, we exploit the timing of price reactions and media coverage to identify the direction of influence from market to media. While media tone generally follows initial price movements, it reflects earnings information when price and fundamentals conflict, indicating that journalists exercise independent judgment rather than simply echoing prices. The media’s coverage response to initial market reactions also varies systematically with media sophistication. Professional outlets adjust their reporting to the informativeness of price signals, whereas nonprofessional outlets respond more mechanically to price movements. These differences have implications for price discovery. Professional coverage is associated with more efficient incorporation of earnings information into prices, particularly when initial price signals are less reliable. Overall, our findings highlight that media sophistication shapes how market signals are interpreted and incorporated into prices.

Working Paper: Earning the Headlines: Manager-Disclosed Non-GAAP Earnings and Financial Media Headlines

• Co-authors: Farzana Afrin (California State University, Fullerton) and Kenneth Merkley (Indiana University)

• Abstract: We examine how the attributes of managers’ non-GAAP earnings disclosures influence the financial media’s choice to include non-GAAP earnings in article headlines covering firms’ earnings announcements. We focus on two levers: 1) how aggressively managers construct non-GAAP earnings and 2) how prominently they feature non-GAAP earnings in the earnings announcement press release. We find that managers place high emphasis on non-GAAP earnings in 61 percent of the earnings announcements in our sample, yet only 7 percent of article headlines mention it. Mentions are less likely when the non-GAAP earnings measure relies on large exclusions and more likely when managers feature non-GAAP earnings more prominently. We further find that this latter emphasis attenuates when exclusions are large. Finally, we provide evidence that financial media non-GAAP headline choices are associated with market pricing: the return response to non-GAAP earnings surprises rises with non-GAAP headline intensity. This association is roughly triple for national media outlets relative to non-national media outlets and concentrates among firms with sparse analyst and media coverage. Our findings suggest that the financial media plays a significant role in influencing the effective prominence of manager-disclosed non-GAAP earnings information for investors in capital markets.

Work in Progress: Compensation Responses to SEC Investigations of Connected Firms

• Co-authors: Terrence Blackburne (Oregon State University) and Jason Xiao (Binghamton University)

Work in Progress: Media Coverage of Unionized Firms

• Co-author: Hunter Pearson (University of Houston)

Work in Progress: Material Weakness Severity and Disclosure Complexity

• Co-authors: Millie Hutton (University of Mississippi) and Marcy Shepardson (Indiana University)