Trade war, media tone and market reaction asymmetry
Journal of Chinese Economic and Foreign Trade Studies
ISSN: 1754-4408
Article publication date: 8 May 2023
Issue publication date: 17 May 2023
Abstract
Purpose
This study investigates the impacts of Chinese media reporting strategy (media tone) on the market performance of US-trade-intensive firms vs non-US-trade-intensive firms and the effect of media tone on the occurrence of good and bad news.
Design/methodology/approach
News texts were retrieved from nine major financial/economic media outlets. Lexical analysis and event study have been adopted to examine the impact of different types of news during the US–China trade frictions on Chinese firms.
Findings
The results show that US-trade-intensive firms vs non-US-trade-intensive firms exhibited different reactions to media coverage. US-trade-intensive firms care more about the governmental attitudes toward the trade war and potential policy supports implied in the official media reports than non-US-trade-intensive firms do. The return-chasing behavior hypothesis is supported by US-trade-intensive investors, and this effect is further enhanced when multiple releases occur on the same day. A higher media tone combined with intensified media releases significantly increases the volatilities of both US-trade-intensive and non-US-trade-intensive firms.
Practical implications
Information provided by this study helps the regulatory authorities to formulate measures to enhance investor confidence and better optimize resource allocation.
Originality/value
This study investigates the asymmetric effect of media tone on US-trade-intensive firms vs non-US-trade-intensive firms, which has not been examined, to the best of the authors’ knowledge, in the existing literature.
Keywords
Citation
Zhang, W. and Du, J. (2023), "Trade war, media tone and market reaction asymmetry", Journal of Chinese Economic and Foreign Trade Studies, Vol. 16 No. 2, pp. 153-171. https://doi.org/10.1108/JCEFTS-10-2022-0064
Publisher
:Emerald Publishing Limited
Copyright © 2023, Emerald Publishing Limited