Merger Rumor Has It: Sensationalism in Financial Media

May 25, 2013 Leave a comment

Rumor Has It: Sensationalism in Financial Media

Kenneth R. Ahern University of Southern California – Marshall School of Business

Denis Sosyura University of Michigan – The Stephen M. Ross School of Business

May 5, 2013

Abstract: 
Financial media have an incentive to publish sensational news. We study how these incentives affect asset prices through one form of media sensationalism – merger rumors. Using a novel dataset, we find that newspapers are more likely to publish merger rumors about firms that interest their readers: local firms with recognizable brands that are owned by retail investors. Yet, rumors about these types of firms are less likely to come true. Instead, a rumor’s accuracy is predicted by journalists’ experience, training, and reputation, but stock returns do not reflect this information. Overall, we find that investors do not completely account for the distortions created by sensationalist reporting standards.

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Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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