THE HIDDEN FACE OF THE MEDIA: HOW FINANCIAL JOURNALISTS PRODUCE INFORMATION

Abstract

This study investigates how the media produces information. Using a sample of 296,497 Wall Street Journal news articles, I find that news articles written by experienced and reputable financial journalists are more informative about future earnings. I then examine the source of such information advantage by studying the detailed quotes from news articles. I further find that these journalists rely more heavily on first-hand access to management, institutional investors, and other external experts, an important channel through which they produce informative news. Interestingly, however, this information advantage is present only when the experienced and reputable journalists remain independent -- for those journalists that repeatedly cover the same firm or rely primarily on information from management, the networking information advantage is completely muted.

Further, I perform two additional tests. In the first test, I employ news articles about firm fundamentals, and in the second I use a revised measure of information content by including Dow Jones Business News. I continue to find that the information advantage of experienced and reputable journalists obtains only when these journalists remain independent.

These results suggest that the quality of the media as an information intermediary depends critically on individual journalists' ability to access information from industry networks and provide unbiased news.