Mediating markets: financial news media and reputation risk management
Masie, Desné Rentia
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The increase of interest in financial culture following the financial crisis, which started in 2008, as well as the proliferation of financial data, have sparked an emerging research agenda into the role of financial news media. Moreover, financial news media is an important research topic in finance because information released through the media has a wider audience than other information intermediating systems in the financial market. This thesis defines the financial journalist as a significant actor in the intermediation of financial information. It also contributes to understanding how the relationships between intermediaries in firms’ information environments affect financial markets, and in particular whether claims for professionalization can be made by financial journalists and public relations practitioners for their interrelating activities. The further contribution of the thesis is its integration of an interdisciplinary and mixed methods approach. The thesis investigates the research problem through three independent empirical studies that are linked to the research aim of the thesis, and each other, but can be read independently. The first study uses the quantitative, event-study method and tests how 100 small-cap US stocks are affected by different types of carefully-selected information, namely analysts’ recommendations, corporate filings, news media, public relations wires and stock tips received over five years from 1 January 2006 to 31 December 2010. Its first contribution is a problematisation of firms’ information environments from an information intermediation perspective. It therefore finds that news media has the largest negative and absolute effect on stock prices, trading volumes and volatility. The intuitions for this are news media’s wide dissemination; its attraction to reporting bad news, as well as to interpreting events negatively. Further, its independence from firms and role in corporate governance are thought to make bad news especially surprising. The second and third studies form two halves of a qualitative symmetrical study that tests for the intuitions and findings of the quantitative study. They do so through structured and semi-structured interviews with experienced journalists and corporate public relations practitioners about their own perceptions of their respective self-constitutions and ethics; their relationships to each other; their understandings about how their own work and other information intermediaries’ work in firms’ information environments affect financial information; and to determine if and how these factors affect the manner in which they go about doing work. Study 2 considers journalists as actors in the financial market by problematizing them as information intermediaries who disseminate financial information and contribute to corporate governance. It finds they have a professional ethic biased towards reporting bad news and contributes to understanding the professional constitutions and knowledge construction activities of journalists through demonstrating how their beliefs, motivation and self-awareness influence reporting choices and actions. Their level of expertise and credibility in these activities is linked to the relative performativity of news stories. Study 3 studies the expansion of public relations’ reputation risk management activities in relation to journalists and evaluates the industry’s claim for professionalism using Gieryn’s (1983) analytical framework of boundary-work. It considers public relations practitioners as actors in financial markets in the context of globalised, high-speed financial markets and increased demands for corporate social responsibility. It finds that public relations is increasing its monopoly over the dissemination and intermediation of financial information but cannot yet make a claim for professional jurisdiction over these activities.