Three Essays on Financial Economics Open Access

Zhou, Dexin (2015)

Permanent URL:


This dissertation examines the role of qualitative information in financial markets. Using textual analysis methodologies, I quantify the qualitative information in news media and corporate disclosures. The first essay (The Blame Game) examines the information in corporate executives' self-serving attribution behaviors. Using textual analysis, I construct a measure that identifies corporate executives' behaviors of blaming external factors such as economy or the industry. I find that the patterns of the blame behaviors are consistent with self-serving attribution bias. I also find that a high blame measure leads to low subsequent stock returns and low turnover-performance sensitivity. Blame behaviors also predicts negative earnings surprise and analyst downgrades. Further tests show that these results are robust after controlling for exposure to systematic risk factors. These results support the idea that investors underreact to firm-specific negative information when corporate executives blame external factors. The second essay (Analysts' Assimilation of Soft Information in the Financial Press), coauthored with Xue Wang and Mark Bradshaw, investigates the role of analyst in interpreting soft news from news media. We find that the quantity of news coverage of a firm is positively associated with subsequent analyst recommendation revision activity. Moreover, the recommendation revisions are more informative for firms with more intense news coverage. We also find that this relationship is mainly driven by soft news (news with low fraction of numeric information). These results shed new light on the source analysts' mosaic of information and the role of analysts. The third essay examines managers' (Good News in Numbers) use of numbers versus words in the conference call disclosure. I find that executives tend to use numbers when companies experience satisfactory performance and use words when they have to disclose poor performance. In addition, the ratio of numbers and words contains value-relevant information about the company. Market reacts positively when corporate executives use high fraction of numbers. However, the initial market reaction is incomplete. The stock prices continue to outperform in one quarter following the conference call when corporate executives use more numeric information in the conference calls.

Table of Contents

The Blame Game 1

Introduction 2

Data and Methodology 8

Results 12

Determinants of Executives' Blame Behaviors 12

Predicting Post Conference Call Returns 16

Industry-Adjusted Portfolio 19

Predicting Future Earnings 20

Evidence from Analyst Recommendations 20

Contemporaneous Stock Returns 21

Executive Turnover 22

Conclusion 24

Analysts' Assimilation of Soft Information in the Financial Press 26

Introduction 27

Background and Predictions 34

Background 34

Empirical Predictions 39

Data and Variable Measurement 43

Data 43

Variable Measurement 45

Empirical Results 48

Descriptive Statistics 48

News Coverage and Analyst Research Updates 49

News Coverage and Market Reactions to Analyst Recommendation Revisions 51

Analyst Interpretation of Hard versus Soft Information 55

Extensions and Diagnostics 60

Conclusion 63

Good News in Numbers 65

Introduction 66

Hypotheses Development 71

Data 74

Main Results 77

Determinants of PCTNUM 77

Investor Responses to PCTNUM 80

PCTNUM and Information Precision 83

Conclusion 84

Appendix 86

Tables 86

Figures 114

References 116

About this Dissertation

Rights statement
  • Permission granted by the author to include this thesis or dissertation in this repository. All rights reserved by the author. Please contact the author for information regarding the reproduction and use of this thesis or dissertation.
  • English
Research Field
Committee Chair / Thesis Advisor
Committee Members
Last modified

Primary PDF

Supplemental Files