Timely article in the latest issue of the Journal of Business Communication. In Are Investors Influenced By How Earnings Press Releases Are Written?, Elaine Henry examines the market impact of earnings press releases (EPR). Following a qualitative survey of EPR genre features, the impact of tone (communicative affect) is quantified using content analysis and event study methodology. Event studies are commonly used in accountancy (capital markets) research and assess event impact on company stock price. Based on a large sample of telecom and computer industries EPR, Henry’s findings suggest that:
a) investors are influenced by EPR tone;
b) EPR length negatively influences market reactions and;
c) numerical intensity diminishes EPR market impact
In financially critical times such as these, I wonder how the language used in press releases affects investor sentiment. For instance, the press release Fortis issued a few days ago was clearly intended to boost investor confidence but I think the overly positive tone indexed (warranted) fears of a bank run and hence did more damage than good.
Henry, Elaine (2008). Are Investors Influenced By How Earnings Press Releases Are Written? Journal of Business Communication 45 (4): 363-407. DOI: 10.1177/0021943608319388