Which News Disclosures Matter? News Reception Compared Across Topics Extracted from the Latent Dirichlet Allocation

Transparency regulations typically oblige companies listed on stock markets to publicly disclose any information that might have a significant impact on their stock prices. The corresponding press releases must be signed by those in authority to ensure that they contain information not yet disclosed. As a news source, this paper utilizes so-called ad hoc announcements in English language of firms listed on German stock markets and determines 40 news topics by using the Latent Dirichlet Allocation. Interestingly, research has investigated the list of news topics, but has only invested little effort into examining the corresponding news reception. Accordingly, how investors process the content of news varies greatly across topics: Sentiment of news on financial reports, management changes and loan distributions influences abnormal stock returns positively; tone in announcements on share issue and M&A impacts abnormal returns negatively at a statistically significant level.

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