The Role of Information Intermediaries in Financial Markets

Studying a large sample of announcements made by US companies I find that announcements containing bad news are longer and less focused on the originating company than good news. The pattern is pervasive and suggests companies attempt to "package" bad news and mitigate its negative impact. The paper also examines how news agencies react to company news. It appears that news agencies step in and cut through the packaging by reporting bad company news in a much more concise and focused way. There are measurable benefits to this kind of "unpackaging" activity - by processing company news and making it more transparent news agencies significantly contribute to the resolution of asymmetric information. This is the first paper to compare the language of company news and associated agency reports and analyze the implications for the information environment.

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