The Impact of Corporate News on Stock Prices: Evidence from the Russian Stock Market
Abstract
In the face of complex sanctions, Russian companies are looking for new mechanisms to ensure sustainability. An overcrowded corporate news backdrop could be the source for a significant decline in a company’s market value or growth. Given the importance of information disclosure and corporate news for investors’ expectations, we estimate the effect that four types of corporate news (Official publication of financial results for the quarters and for the year; M&A; Appointment of new persons; Dividend policy) impose on shares of three Russian companies in different industries: the financial, energy and high-tech sectors. In order to reflect corporate news’ influence, we developed an index of corporate news for the companies concerned utilizing daily data ranging 2015–2021. By applying a vector error-correction model, we demonstrate that corporate news and corporate equities are related over the long run. Short-run results obtained with the Granger test suggest no evidence of causality. At the second stage, we construct impulse response functions that affirm the effect of corporate news on stocks. Corporate news has a high and positive effect on stock prices in the high tech and energy sectors, while the financial sector reacts in a mixed manner to corporate news, and the effect is weak. Obtained results serve as the basis for practical recommendations to individual and institutional investors, as well as to companies for market value management.
Downloads
References
Huang A.G., Tan H., Wermers R. Institutional trading around corporate news: Evidence from textual analysis. The Review of Financial Studies. 2020;33(10):4627-4675. https://doi.org/10.1093/rfs/hhz136 DOI: https://doi.org/10.1093/rfs/hhz136
Antweiler W., Frank M.Z. Do US stock markets typically overreact to corporate news stories? SSRN Electronic Journal. 2006. https://doi.org/10.2139/ssrn.878091 DOI: https://doi.org/10.2139/ssrn.878091
John K., Lang L.H.P. Insider trading around dividend announcements: Theory and evidence. The Journal of Finance. 1991;46(4):1361-1389. https://doi.org/10.1111/j.1540-6261.1991.tb04621.x DOI: https://doi.org/10.1111/j.1540-6261.1991.tb04621.x
Article 30 of Federal Law N 39-FZ dated 22.04.1996 “On securities market” (as revised on 02.07.2021). URL: http://www.consultant.ru/document/cons_doc_LAW_10148/1fd8c5ab4657f13029545cd542dd3d01adc9ad51/ (accessed on 11.04.2022). (In Russ.).
Krueger P., Sautner Z., Tang D.Y., Zhong R The effects of mandatory ESG disclosure around the world. ECGI Finance Working Paper. 2021;(754). URL: https://ecgi.global/sites/default/files/working_papers/documents/kreugersautnertangzhongfinal.pdf DOI: https://doi.org/10.2139/ssrn.3832745
Business extent of disclosure index. The World Bank. URL: https://data.worldbank.org/indicator/IC.BUS.DISC.XQ?end=2019&start=2019 (accessed on 11.04.2022).
Fama E.F. Efficient capital markets: A review of theory and empirical work. The Journal of Finance. 1970;25(2):383-417. https://doi.org/10.2307/2325486 DOI: https://doi.org/10.1111/j.1540-6261.1970.tb00518.x
Patell J.M., Wolfson M.A. Good news, bad news, and the intraday timing of corporate disclosures. The Accounting Review. 1982;57(3):509-527.
Strycharz J., Strauss N., Trilling D. The role of media coverage in explaining stock market fluctuations: Insights for strategic financial communication. International Journal of Strategic Communication. 2018;12(1):67-85. https://doi.org/10.1080/1553118X.2017.1378220 DOI: https://doi.org/10.1080/1553118X.2017.1378220
Carberry E.J., Engelen P.-J.,Van Essen M. Which firms get punished for unethical behavior? Explaining variation in stock market reactions to corporate misconduct. Business Ethics Quarterly. 2018;28(2):119-151. https://doi.org/10.1017/beq.2017.46 DOI: https://doi.org/10.1017/beq.2017.46
Blaufus K., Möhlmann A., Schwäbe A.N. Stock price reactions to news about corporate tax avoidance and evasion. Journal of Economic Psychology. 2019;72:278-292. https://doi.org/10.1016/j.joep.2019.04.007 DOI: https://doi.org/10.1016/j.joep.2019.04.007
Kim Y., Li H., Li S. Corporate social responsibility and stock price crash risk. Journal of Banking & Finance. 2014;43:1-13. https://doi.org/10.1016/j.jbankfin.2014.02.013. DOI: https://doi.org/10.1016/j.jbankfin.2014.02.013
Feng J., Goodell J.W., Shen D. ESG rating and stock price crash risk: Evidence from China. Finance Research Letters. 2022;46(Pt.B):102476. https://doi.org/10.1016/j.frl.2021.102476. DOI: https://doi.org/10.1016/j.frl.2021.102476
Valvi A.C., Fragkos K.C. Crisis communication strategies: A case of British Petroleum. Industrial and Commercial Training. 2013;45(7):383-391. https://doi.org/10.1108/ICT-04-2013-0026 DOI: https://doi.org/10.1108/ICT-04-2013-0026
Gillan S.L., Martin J.D. Financial engineering, corporate governance, and the collapse of Enron. SSRN Electronic Journal. 2002. https://doi.org/10.2139/ssrn.354040. DOI: https://doi.org/10.2139/ssrn.354040
Carretta A., Farina V., Martelli D., Fiordelisi F., Schwizer P. The impact of corporate governance press news on stock market returns. European Financial Management. 2011;17(1):100-119. https://doi.org/10.1111/j.1468-036X.2010.00548.x DOI: https://doi.org/10.1111/j.1468-036X.2010.00548.x
Taleb W., le Guenedal T., Lepetit F. et al. Corporate ESG news and the stock market. SSRN Electronic Journal. 2020. https://doi.org/10.2139/ssrn.3723799. DOI: https://doi.org/10.2139/ssrn.3723799
Flammer C. Corporate social resposibility and shareholder reaction: The enviromental awareness of investors. The Academy of Management Journal. 2013;56(3):758-781. https://doi.org/10.5465/amj.2011.0744x DOI: https://doi.org/10.5465/amj.2011.0744
Nam K.H., Seong N.Y. Financial news-based stock movement prediction using causality analysis of influence in the Korean stock market. Decision Support Systems. 2019;117:100-112. https://doi.org/10.1016/j.dss.2018.11.004. DOI: https://doi.org/10.1016/j.dss.2018.11.004
Capelle-Blancard G., Petit A. Every little helps? ESG news and stock market reaction. Journal of Business Ethics. 2019;157(2):543-565. https://doi.org/10.1007/s10551-017-3667-3 DOI: https://doi.org/10.1007/s10551-017-3667-3
Carlini F., Cucinelli D., Previtali D., Soana M.G. Don’t talk too bad! Stock market reactions to bank corporate governance news. Journal of Banking & Finance. 2020;121:105962. https://doi.org/10.1016/j.jbankfin.2020.105962 DOI: https://doi.org/10.1016/j.jbankfin.2020.105962
Radar. Yandex. URL: https://radar.yandex.ru/search?period=2020-12-01%3A2021-03-31 (accessed on 11.04.2022). (In Russ.).
Official website of Gazprom. URL: https://www.gazprom.ru/about/ (accessed on 11.04.2022). (In Russ.).
Official website of Tinkoff. URL: https://www.tinkoff.ru/about/ (accessed on 11.04.2022). (In Russ.).
“Sber” announced ecosystem reform. RBC. Feb. 15, 2022. URL: https://www.rbc.ru/finances/15/02/2022/620ba0019a79477dc26cdd0a (accessed on 11.04.2022). (In Russ.).
Press Center of Sberbank. URL: https://www.sberbank.ru/ru/press_center (accessed on 11.04.2022). (In Russ.).
Index stock quotes MOEX Blue Chip. Investing.com. URL: https://ru.investing.com/indices/rts-standard-components (accessed on 11.04.2022). (In Russ.).
Stock prices of the IRTS. Investing.com. URL: https://ru.investing.com/indices/rtsi-components (accessed on 11.04.2022). (In Russ.).
Unprecedented oil crisis: What the price war between Saudi Arabia and Russia resulted in. Forbes. Apr. 18, 2020. URL: https://www.forbes.ru/biznes/398433-nebyvalyy-neftyanoy-krizis-k-chemu-privela-cenovaya-voyna-saudovskoy-aravii-i-rossii (accessed on 11.04.2022). (In Russ.).
Finrange official website. URL: https://finrange.com (accessed on 11.04.2022).
FINAM official website. URL: https://www.finam.ru (accessed on 11.04.2022). (In Russ.).
The 10 biggest crashes in the history of stock exchanges. FINAM. Aug. 20, 2021. URL: https://www.finam.ru/analysis/newsitem/10-krupneiyshix-kraxov-v-istorii-fondovyx-birzh-20210820-13064/ (accessed on 11.04.2022). (In Russ.).
Yahoo! Finance. URL: https://finance.yahoo.com (accessed on 11.04.2022).
Press Center of Gazprom. URL: https://mrg.gazprom.ru/press/ (accessed on 11.04.2022). (In Russ.).
Press Center of Tinkoff. URL: https://www.tinkoff.ru/about/news/ (accessed on 11.04.2022). (In Russ.).
Press Center of Yandex. URL: https://yandex.ru/company/press_releases/2022 (accessed on 11.04.2022). (In Russ.).
Yin K., Liu Z., Jin X. Interindustry volatility spillover effects in China’s stock market. Physica A: Statistical Mechanics and its Applications. 2020;539:122936. https://doi.org/10.1016/j.physa.2019.122936 DOI: https://doi.org/10.1016/j.physa.2019.122936
Copyright (c) 2022 National Research University Higher School of Economics
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
