Foreign media slant, foreign investors, and informativeness of earnings

Although foreign media outlets make up a substantial proportion of the media covering U.S. financial markets, their characteristics and role in these financial markets have not been explored. Using a novel, manually collected dataset covering 1,126 media outlets from 48 countries, we explore whether there are systematic differences in the reporting properties of foreign and domestic media when they cover U.S. firm earnings announcements. We find that the coverage of foreign media outlets tends to exhibit a more negative slant than does the coverage of domestic media outlets. We further find that the negative slant of foreign media coverage is more pronounced for media outlets from countries that are less economically, politically, and culturally proximate to the U.S. We also document that a greater amount of foreign media coverage amplifies the stock market’s reaction to earnings news, increases abnormal trading volume, and reduces information asymmetry between firms and investors. We find these effects to be stronger for firms with a higher degree of foreign ownership. Further analyses show that foreign media coverage plays a more significant role than domestic coverage in facilitating the incorporation of future earnings news into current stock prices. Overall, our findings shed new light on the role of foreign media in capital markets.