Friends at WSJ: Journalist Connections, News Tone, and Stock Returns



This paper studies the effect of the firm–journalist network on news tone and stock returns. Using a unique dataset on the firm’s and the CEO’s connections to Wall Street. Journal (WSJ) reporters, I find that such connections lead to markedly more favorable coverage of corporate M&A news and to better market reactions to the mergers. The effect on the financial market is larger for the deals featured on the front page of the WSJ. For identification, I instrument the connected coverage with the reporters’ turnover and find similar results. Furthermore, using Rupert Murdoch’s acquisition of the WSJ as an exogenous shock to journalistic independence, I show that firms previously connected to Mr. Murdoch receive better coverage and more positive stock returns after the ownership change