Capital market effects of media synthesis and dissemination: evidence from robo-journalism
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In 2014, the Associated Press (AP) began using algorithms to write articles about firms’ earnings announcements. These “robo-journalism” articles synthesize information from firms’ press releases, analyst reports, and stock performance and are widely disseminated by major news outlets a few hours after the earnings release. The articles are available for thousands of firms on a quarterly basis, many of which previously received little or no media attention. We use AP’s staggered implementation of robo-journalism to examine the effects of media synthesis and dissemination, in a setting where the articles are devoid of private information and are largely exogenous to the firm’s earnings news and disclosure choices. We find compelling evidence that automated articles increase firms’ trading volume and liquidity. The effects are most likely driven by retail traders. We find no evidence that the articles improve or impede the speed of price discovery. Our study provides novel evidence on the impact of pure synthesis and dissemination of public information in capital markets and initial insights into the implications of automated journalism for market efficiency.
KeywordsMedia Synthesis Dissemination Automation Trading volume Liquidity
JEL classificationsG12 G14 M41
We thank Mary Barth, Mark Bradshaw (discussant), John Campbell (discussant), Kimball Chapman, Stefan Huber, Charles Lee, Roby Lehavy (discussant), Russell Lundholm (editor), Sarah McVay, Greg Miller, Hal White, an anonymous referee, and participants at the 2016 Stanford Summer Camp, 2016 UBCOW Conference, 2016 HKUST Accounting Symposium, 2017 FARS Midyear Meeting, University of Wisconsin, and the 2017 UC Davis Accounting Conference for helpful suggestions. We are sincerely grateful to the Associated Press for its extensive support. We thank Christina Maimone for programming assistance and Shauna Bligh and Mae Bethel for research assistance. Financial support was provided by the Stanford Graduate School of Business and University of Washington Foster School of Business. All errors are our own. Additional analyses mentioned in this paper can be found in the internet appendix.
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