Does News Drive News Coverage?

One of the biggest financial news stories this year has been the resignation of Carlos Ghosn as chairman and CEO of Renault.

Reviewing the coverage I discovered that the story appears to be the exception, not the rule to how the media writes about companies.

Ghosn's resignation sparked a huge amount of media interest. The average daily number of news articles about Renault on Bloomberg surged to 667 in 2019, more than a two-fold increase from 2018 and a three-fold rise from 2017.

And the Ghosn narrative dominated the news about Renault. Over the past week, Ghosn appeared in about two thirds of the stories about the automaker.

But that kind of swing in intensity is unusual.

It turns out that if you take the companies in France's benchmark CAC index and rank them by volume of news stories, what jumps out is the consistency of coverage.

Look at the daily average number of stories about Airbus, Peugot, BNP and Societe Generale over the past four years: they tend to be about the same year after year.

This seems counter intuitive. One would assume that the volume would fluctuate with events that journalists deem newsworthy.

In fact it doesn't appear in general that "news events" drive volume.

It seems to take a truly extraordinary story - such as the Ghosn arrest and resignation - to break that pattern.

The thesis seems to be confirmed looking at other markets in Europe.

In the case of Germany's benchmark DAX index Volkswagen, Deutsche Bank, BMW and Siemens have ranked first, second, third and fourth, respectively, in terms of average number of daily news articles for the past four years.

And while its not surprising that big companies get written about a lot, it is striking that the volumes of daily average stories have ranged in tight bands.

We see a similar pattern with the IBEX in Spain.

Its too small a data set to draw a definitive conclusion. But looking at these and other examples it would appear that news events don't tend to drive news flow nearly as much as many people might assume.

Rather, it looks like there is an amount of coverage a company gets based on its size or prominence and that that doesn't fluctuate much year to year.

There are reasons this might be the case. One possibility is that reporters are assigned specific "beats" and so the person who writes about Airbus does so consistently.

Another possibility is that companies release press releases based on patterns and so they tend to post comparable numbers and those get covered by those same reporters.

Neither of those reasons explain a situation like Renault, where an extraordinary event sparks a surge in coverage. But it's interesting to realize that Renault may itself be an outlier.