The implications of financial journalism on the Maltese stock market : an analysis

Abstract

Purpose: The aim of the study is to analyse the impact that the financial media has on the local stock market by examining the relationship that exists, if any, between public news announcements and the capital market. Design: The key research objectives were tackled using a combined methodology. The first part of the research consisted in the analysis of articles issued in local financial newspapers between the years 2012 and 2013. Different statistical techniques were utilised to ascertain whether any relationship exists between three different categories of variables: Company-specific, Market-specific and Media-specific variables. To consolidate further these findings, eight semi-structured interviews were conducted with financial journalists and other contributors in the local financial media. Findings: The empirical research has provided evidence that investors do react to financial news, particularly when the local financial media publishes negative news about a listed company. Further evidence has shown that local investors also react to foreign financial news on the parent of local listed companies. The factors which are likely to influence press coverage of listed companies are the company size, the business model, industry and the publishing day of the financial news article. The semi-structured interviews provoked some interesting reactions from those involved in the local financial media circle, whereby the major areas of concern with regards to the current practice of financial journalism are the lack of financial journalists, the lack of trading in the local stock market, the lack of financial education amongst local investors and the lack of analysis and opinion in financial news articles. Conclusions: Such findings indicate that given the specific characteristics and limitations of the Maltese stock market, financial news still have an impact on the share prices of listed companies although such impact is considered to be minimal when compared to other foreign capital markets. Value: The results of this study shed light on the role that financial news play in the local market. This may have important implications for the accountancy profession as it may concern investors, academics and authorities.