Stock liquidity and tone of press releases

This paper presents evidence that higher stock liquidity makes firms increase tone of press releases. I find that firms with higher stock liquidity have higher tone in press releases, relative to the tone of news initiated by media, than firms with lower stock liquidity. This relation is stronger for firms with greater short-term pressure, that is, with greater transient institutional ownership, greater sensitivity of manager's wealth to stock price, and more analyst coverage. This finding suggests that stock liquidity, by producing short-term pressure on firms, leads firms to boost press release tone.

Automated summary

This paper provides evidence that firms with higher stock liquidity tend to have a more positive tone in their press releases compared to media-initiated news. This effect is stronger for firms facing greater short-term pressure, such as those with higher transient institutional ownership, higher sensitivity of manager's wealth to stock price, and more analyst coverage. The findings suggest that stock liquidity leads firms to enhance the tone of their press releases by exerting short-term pressure on them.