Abstract
How does the stock market react to the media coverage about a firm’s efforts in addressing non-financial stakeholder claims during COVID-19 pandemic? Focusing on daily data in the first quarter of 2020, I have examined the relationship between daily abnormal returns (AR) of US listed companies and independent media sentiment on a firm’s issues related to customers, employees, community, and the environment. Merging Compustat security daily data and TruValue Labs daily sentiment data, I constructed a panel data of 313,049 firm-day observations, representing 5,133 listed firms in the US. I first measured sentiment for each stakeholder’s issues as four dummies: no news, negative sentiment, neutral sentiment, and positive sentiment. Random-effect panel regressions report that, compared to no news or neutral sentiment, negative and positive sentiment on customer issues may result in an additional daily AR of 13.207 p.p. (p<0.001) and 14.316 p.p. (p<0.001) respectively. On employee issues, negative sentiment would result in a lower daily AR by 6.394 p.p. (p<0.05), compared to no news, neutral or positive sentiment – the three of which appear to have no statistically significantly different effects on daily AR. On community issues, whether there is news or whether the news was in a negative, neutral, or positive sentiment would not have statistically significantly different effects on AR. On environment issues, positive and negative sentiment would cause a lower daily AR by 8.724 p.p. (p<0.01) and 7.539 p.p. (p<0.01) respectively, compared to no news or neutral sentiment. Finally, I measured sentiment as a continuous value between -1 (most negative) and 1 (most positive), and found that only employee sentiment has statistically significant linear effects on AR. Daily AR would increase by 7.325 p.p. (p<0.1) and 9.277 p.p. (p<0.05) respectively if the sentiment on employee issues increased by 1, under the assumptions of “no news is missing information” and “no news is neutral news”.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
