The Media and Mispricing: The Role of the Business Press in the Pricing of Accounting Information

June 3, 2013 Leave a comment

The Media and Mispricing: The Role of the Business Press in the Pricing of Accounting Information

Michael S. Drake Brigham Young University – Marriott School

Nicholas M. Guest Massachusetts Institute of Technology (MIT) – Sloan School of Management

Brady J. Twedt Indiana University – Kelley School of Business

May 1, 2013

Abstract: 
This study investigates the role of the business press in the pricing of accounting information. Using a comprehensive dataset of more than 111,000 earnings-related business press articles published from 2000-2010, we find that press coverage of the current period earnings announcement mitigates cash flow mispricing, but has a negligible effect on accrual mispricing. We investigate whether this impact is driven by the press disseminating the information more broadly or by providing content that helps investors understand the implications of accounting information. We find support for the information dissemination role only. Taken together, our results suggest that the business press plays an important role in facilitating the market’s ability to efficiently impound accounting information into stock prices, and we provide insights into the role of the business press as an information intermediary in capital markets.

Filed under Research

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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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