CEO Media Exposure and Stock Price Synchronicity: Simultaneous Equations System

Document Type : Research Paper

Authors

1 Department of Accounting, Faculty of Economic and Administrative Sciences, university of mazandaran Babolsar, Iran.

2 Department of Accounting, Faculty of Economic and Administrative Sciences, Universityof Mazandaran, Babolsar, Iran.

3 Department of Accounting, Faculty of Economic and Administrative Sciences, Mazandaran University, Babolsar, Iran.

Abstract

 Introduction
An important part of capital market research is relating stock price and its informative, especially the firm-specific information. Accordingly, many studies have been directed on the concept of stock price synchronicity and the factors affecting it, which represent part of stock price informative. In explaining these factors, the CEO media exposure is one of the factors that affect the stock prices synchronicity.
 
 Research Questions or hypothesis
Therefore, and due to the importance of the impact of this factor, which indicates how investors pay attention to the specific information of businesses, the purpose of this study is to investigate the effect of CEO media coverage on stock price synchronization.
 
 Methods
In this regard, data of 146 firms of Tehran Stock Exchange during the years 2011 to 2019 was collected and tested with the simultaneous equations system.
 
 Results
Findings based on the Generalized Method of Moments (GMM) showed that the CEO media exposure has a negative effect on stock price synchronicity. Also, according to the seemingly unrelated regression (SUR), there is a relationship between CEO media exposure and stock price synchronicity.
 
 Discussion and Conclusion
The media as an important and accessible information tool of the society can play a prominent role in informing and informing the stakeholders. This is especially important in economies where transparency is low and information resources are scarce. Accordingly, the purpose of this study was to study the effect of CEO media exposure on stock price synchronicity. The findings show that the CEO's media exposure had a significant negative effect on stock price synchronicity. Therefore, disclosure of information through the media by managers causes stock prices to be more affected by firm-specific information than market information. Such a move by managers is actually considered a kind of signaling to the market. Because media exposure causes financial transparency and causes the business unit to take steps to provide reliable information, which causes the basis of investors' decision-making to change direction from market and industry news to firm-specific information, and it also has a negative impact on stock price synchronicity. Therefore, CEO media exposure can be considered as one of the tools that has informative content. It is suggested that investors consider the CEO's media coverage in addition to the fundamental and traditional factors of companies when making their decisions. Because this is important, especially in emerging and less developed markets such as Iran, where there are more barriers to correlation between company-specific information and stock prices. Also, it is suggested that due to the lack of financial analysts in the Iranian market, as well as excessive fluctuations in risk and return, investors should use the CEO's media coverage as an alternative to providing and disclosing incomplete information. The media coverage of the CEO can be considered as one of the examples and components of the law for the protection of the rights of micro-investors. It also supports the view that in emerging markets, politically connected firms have wider media coverage, given the complementary findings that reflect the negative impact of CEO coverage on stock price synchronization in higher influential companies.
 
Keywords: CEO Media Exposure, Generalized Method of Moments, Seemingly Unrelated Regression, Stock Price Synchronicity.
 
 

Keywords

References

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Journal of Accounting Advances
Volume 13, Issue 2 - Serial Number 81
December 2021
Pages 197-226

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History

  • Receive Date: 19 January 2022
  • Revise Date: 13 March 2022
  • Accept Date: 13 March 2022

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