Unexpected Distractions and Investor Attention to Corporate Announcements

Doron Israeli, Ron Kasznik, Suhas A. Sridharan

Research output: Working paper

Abstract

We investigate whether and to what extent unexpected distractions affect investors' reactions to firm announcements. We use a daily news pressure index as a proxy for the presence of potential investor distraction. Since breaking news captured by this index is largely unpredictable and unrelated to investors' valuation decisions, our research design offers a unique opportunity to examine investor attention in the absence of strategic timing of announcements by managers. We examine a broad set of corporate announcements to further explore how investor attention varies with announcement type. Using overall trading and Google search volume as measures of investor attention, we find that investors are susceptible to distraction in their reactions to corporate announcements. Our findings also reveal that investor attention varies with announcement type, that retail investors are particularly susceptible to distractions, and that the price reaction to corporate announcements is not affected by unexpected distractions. Taken together, our results suggest that investor inattention manifests itself through muted retail trading activities but does not necessarily lead to observable pricing effects.
Original languageEnglish
Publication statusSubmitted - 2019

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Announcement
Investors
Retail
Pricing
Google
Trading activity
News
Price reaction
Research design
Managers

Keywords

  • Investor attention
  • Corporate announcements
  • Retail trading
  • Distraction

Cite this

Unexpected Distractions and Investor Attention to Corporate Announcements. / Israeli, Doron; Kasznik, Ron; Sridharan, Suhas A.

2019.

Research output: Working paper

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