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How newspapers kill stocks
Maybe there is such a thing as bad publicity.
A new study from Brigham Young University sociology professor Brayden King concludes that media coverage of protests against companies can hurt those companies’ stock prices. That may seem obvious, but this study quantifies the effect, at least at The New York Times: 0.4 percent to 1 percent on average.
From the press release:
An analysis of 342 protests covered by The New York Times revealed that stocks of targeted companies declined one-tenth of a percent for every paragraph printed about it in the newspaper.
And an example:
One Friday in April 2006, a group of Mohawk Indians blocked freight trains in southern Ontario as an act of protest over a centuries-old land dispute. Editors at The New York Times gave the story 13 paragraphs of print and the railway’s stock price dropped 5.8 percent below the expected return by the end of trading the next Monday.
King and co-author Sarah Soule of Cornell University did their analysis using protests over a 28-year period. The study also found that most of the drop happens on the day of the protest and the day after.
The study will be published in the next issue of Administrative Science Quarterly .
(Photo: Reuters)
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