Impact of corporate announcements – a matter of credibility

By | 04/08/2018

Usually, stock markets are quite stress-resistant if it comes to (even relevant) news. It is hard for an individual news piece to move whole markets. IR Magazine has now published an article by Henry Downing that reflects on the circumstances in which¬†impact can still be dramatic. In this context, it highlights the important role of source credibility. News about individual companies or the market situation as a whole is only taken seriously if a reliable source gets involved – which is seen as confirmation of the content. Downing cites the case of Twitter, for which a leaked tweet by a competitor suggested an unexpectedly bad performance. The immediate reaction was almost non-existent, but when news agency Reuters jumped in, confirming the rumour, this yielded an almost immediate 5% drop in Twitter’s stock price.

This implies the increasing role of credible sources in a media and social media context, in which everyone can produce content and independent agencies and journalists take on the important function to verify the news. A message by a company alone will not move stakeholders unless independent players such as agencies, communities or even government agencies add weight. As a consequence, Downing emphasizes the need for an “open and consistent dialogue with key members of the community, government and financial markets” – to secure attention when it is needed most.

While it is tempting to dismiss the role of independent verification in an age where a company can basically run its own communications and engagement channels with customers and other stakeholders, any such strategy does need to carefully consider stakeholders’ scrutiny and verification needs and mechanism.

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