To measure investor attention, I calculate the amount of firm-specific news items in a recently developed news analytics product: The Thomson Reuters News Analytics (TRNA).
H1: High investor attention (measured by the volume of firm-specific news articles) at the time of share repurchase announcements is negatively related to actual repurchase activity following the announcements.
The results show that high numbers of firm-specific news articles tend to decrease the probability that firms will actually repurchase shares following the announcements.
The CDS market is slow to price common information, while it prices firm-specific news at about the same speed as equity markets.
Due to the information generated by their banks' lending activities, they may be well informed about firm-specific news (as discussed by Acharya and Johnson, 2007), but we argue that they may be relatively uninformed with respect to the credit risk implications of market-wide information.
When firm-specific news arrives, all participants in the CDS market are well informed.
Similarly, Tetlock, Saar-Tsechansky, and Macskassy (2008) find that content in firm-specific news articles is correlated with the returns of individual stocks.
However, we are wary that due to labor and space constraints not all firm-specific news will be covered in the TRNA dataset.
21) In the future, as the news dataset continues to grow and news coverage becomes more comprehensive, the return predictability could be improved by selecting only stocks with relevant linkages for each firm-specific news event by matching the nature of the linkages to the content of the news (e.
However, opacity can also be costly to insiders because they must also bear the cost of bad firm-specific news.
The arrival of bad firm-specific news is costly to insiders and might reach a level such that insiders are unable or unwilling to assume the losses generated by the firm.
Jin and Myers (2006) posit that firm opacity causes insiders to absorb a greater amount of firm-specific risk, leading to a higher frequency of crashes among opaque firms than among transparent firms when firm-specific news is bad.