An analysis of the impact of media coverage on stock price crashes and jumps: Evidence from Japan

We attempt to identify a possible linkage between stock price crashes and jumps and media coverage by using data from Japanese stock markets and newspaper articles. Our evidence clearly indicates that crash frequency increases with media coverage and its seasonal concentration. This key finding supports the notion that intensive media reports on a firm provoke extremely large reactions in the market to corporate news. However, we find no evidence that media coverage has a positive impact on jump frequency. Further, by using an alternative measure of the scale of crash returns, we confirm the increasing effect of media coverage on crashes. We also find that the media effect is caused by market reactions, particularly to news on official disclosure information such as announcements of accounting results.