The impact of non financial news on the profitability of gaming companies

EXECUTIVE SUMMARY This study aims to evaluate the relationship between non-financial news and the financial performance of gaming companies on a global basis, with a focus on determining

Dissertation submitted in partial fulfilment of the

Requirement for the MSc in Finance

Supervisor: Dr Bui Huy Trung

September 2023

EXECUTIVE SUMMARY

This study aims to evaluate the relationship between non-financial news and the financial performance of gaming companies on a global basis, with a focus on determining whether such news has a positive or negative effect Quarterly reaction of profitability ratios, namely Return on Assets (ROA) and Return on Equity (ROE), towards the releases of non-financial news on a sample of 52 public gaming companies from 2018 to 2022 was analysed The dataset includes data on financial metrics of the 52 observed gaming companies and non-financial news pertaining to each company, which was categorised and subjected to statistical models, to assess the influence of non-financial media coverage on two financial performance indicators ROE and ROA The findings of the study indicated that news pertaining to the introduction or upgrades of products and services, as well

as news on client and customer activities, had a favourable effect on ROE Similarly, the presence of news concerning mergers and acquisitions, as well as news related to alliance and partnership activities, exerts a positive impact on ROA

An unforeseen inverse relationship was discovered between news coverage pertaining to promotional and marketing activities of gaming companies and both ROE and ROA It is recommended that organisations employ media monitoring tools and establish rapid response teams, foster internal transparency, and engage stakeholders on a regular basis In addition, it is imperative for organisations to have contingency strategies to address unforeseen events and to carefully evaluate the legal and ethical implications associated with disseminating non-financial information These proactive management strategies in handling such news has the potential to enhance stakeholder relations and foster sustainable growth The study is with several limitations The sample size is constrained and

financial indicators on a semi-annual basis rather than quarterly Furthermore, it is

important to note that the temporal scope of the study is limited to a duration of five

years, specifically from 2018 to 2022, encompassing the occurrence of the

COVID-19 pandemic, which may introduce a potential bias to the findings Finally, the study

could potentially be subject to the researcher's own biases during the process of

primary data collection Notwithstanding these limitations, the research provides

useful insights and establishes a foundation for future investigations

I would like to begin by expressing my utmost gratitude to my thesis supervisor, Dr Bui Huy Trung, for his exceptional knowledge, permanent dedication, and valuable input, all of which had a profound impact on the research's direction and improved its methodology The mentorship and patience shown by you during the whole of the process were really valuable, and I am sincerely appreciative for your unwavering guidance

I want to express my sincere appreciation to the International School of Banking Academy and the University of the West of England for their steadfast commitment

to scholarly excellence and their profound passion for research, which consistently served as a source of inspiration throughout my academic pursuits The intellectual capacities and enthusiasm of the individuals contributed to my understanding of the subject matter and fostered a suitable learning atmosphere through engaging

in intellectually intriguing discussions

I offer my gratitude towards my family for their continual encouragement, comprehension, and motivation during the entirety of this scientific endeavour The firm trust in my capabilities and the continuous support from others acted as a motivating factor that allowed me to sustain focus and perseverance, even when confronted with challenges

I want to show my heartfelt appreciation to my friends and peers for their tremendous encouragement, constructive feedback, and constant moral support Your philanthropic nature and ability to provide unique perspectives greatly improved the overall quality of this endeavour

I also want to convey my sincere appreciation to those persons who have contributed both direct and indirect contributions to this thesis The support you have provided has been of great value, and I am really grateful for your contributions

In conclusion, the accomplishment of this study may be attributed to the collective endeavours and assistance rendered by the aforementioned individuals I would like to extend my sincere appreciation for your substantial contribution to this scholarly pursuit and for your important support in facilitating the successful completion of this thesis

STATUTORY DECLARATION

I herewith formally declare that I myself have written the submitted master’s thesis independently I did not use any outside support except for the quoted literature and other sources mentioned at the end of this paper

Hanoi, / /2023 Student’s signature Confirmation of Supervisor

TABLE OF CONTENTS

EXECUTIVE SUMMARY 1

ACKNOWLEDGEMENTS 3

TABLE OF CONTENTS 6

LIST OF TABLES AND FIGURES 10

CHAPTER 1: INTRODUCTION 11

1.1 Background of the study 11

1.2 Objectives of the study 13

1.3 Questions of the research 14

1.4 Contribution of the research 16

1.4.1 Exploring new perspectives on non-financial news items impacting the financial performance of gaming companies 16

1.4.2 Offering tangible contributions to the administration and use of non-financial news 17

1.4.3 Providing a comprehensive examination of the impact of non-financial news on the profitability of firms at a worldwide level 17

1.5 Structure of the research 18

CHAPTER 2: LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT 19

2.1 Theoretical background of the study 19

2.1.1 Drivers of firms’ profitability 19

2.1.2 Event study theory 20

2.1 The increasing relevance of non-financial news 21

2.2 The influence of different non-financial news items on firm performance 22

2.2.1 News on Products and Services 22

2.2.1.1 News on Product and Service Launches or Updates 22

2.2.1.2 News on Product and Service Delays and Cancellations 23

2.2.1.3 News on Product and Service Issues 24

2.2.2 News on Stakeholder Relations 24

2.2.2.1 News on Client and Customer Activities 24

2.2.2.2 News on Stakeholders 25

2.2.2.3 News on Mergers and Acquisitions 26

2.2.3 News on Management and Strategy 27

2.2.3.1 News on Changes in Management or Core Departments 27

2.2.3.2 News on Strategic Decisions 28

2.2.3.3 News on Alliances and Partnership Activities 29

2.2.3.4 News on Disposals 30

2.2.4 News on Legal and Regulatory Affairs 30

2.2.4.1 News on Accusations, Allegations, and Legal Matters 30

2.2.5 News on Marketing and Public Relations 32

2.2.5.1 News on Promotional and Marketing Activities 32

2.2.5.2 News on Awards and Distinctions 33

2.2.6 News on Crisis Management 34

2.2.6.1 News on Issue Management 34

CHAPTER 3: RESEARCH METHODOLOGY 35

3.1 Sample and data collection 35

3.2 Research design and variable definition 36

3.2.1 Variables 36

3.2.1.1 Dependent variables 36

3.2.1.2 Independent variables 37

3.2.1.3 Control variables 39

3.2.2 Model specification 40

CHAPTER 4: EMPIRICAL RESULTS 42

4.1 Descriptive statistics and correlation analysis 42

4.2 Testing assumptions of the regression model 47

4.2.1 Breusch-Pagan test for Heteroskedasticity 47

4.2.2 Variance Inflation Factor test for Multicollinearity 48

4.2.3 Hausman test for Fixed Effect and Random Effects Regression Model 49

4.2.4 Chi-square test with Seemingly Unrelated Estimation 50

4.3 Regression results 50

4.4 Discussion 54

CHAPTER 5: CONCLUSION 59

5.1 Conclusion 59

5.2 Recommendation for managing non-financial news 60

5.2.1 Media monitoring and rapid reaction 60

5.2.2 Internal communication 60

5.2.3 Stakeholder engagement 61

5.2.4 Managing unexpected news 61

5.2.5 Regulatory Compliance and Ethics 62

5.3 Limitations of the study and future research directions 62

APPENDICES 64

REFERENCES 74

LIST OF TABLES

Table 1: Description of Independent Variables 38

Table 2: Descriptive Statistics 43

Table 3: Correlation Analysis of Key Variables 46

Table 4: Breusch–Pagan/Cook–Weisberg test for Heteroskedasticity 47

Table 5: Variance Inflation Factor for Multicollinearity diagnosis 48

Table 6: Hausman Test for Fixed Effect and Random Effects Regression Model 49

Table 7: Estimated results for ROE by pooled OLS regression 51

Table 8: Estimated results for ROA by pooled OLS regression 53

CHAPTER 1: INTRODUCTION

1.1 Background of the study

Over the past decades, the global gaming sector has witnessed a phenomenal evolution, turning from a mere leisure activity to a multi-billion-dollar industry As the industry has found its influence on the community in both cultural and economic aspects, gaming companies have been trying to make advancements in technology and innovation, as well as means of communication, to reshape the way people perceive their businesses Amidst such context, news and public perception has become immensely essential and pertinent to the development of gaming companies and the overall industry Given the present rapidly changing digital era, where information and news are readily available, along with how the general public and investors can utilise such information for investment choices, the release of corporate information and decisions through media channels can have a substantial impact on the outcomes of any businesses

Traditionally, the assessment of a company’s efficiency and profitability depends largely on its financial figures However, in the context of today’s gaming industry, where technological advancements, constantly shifting trends, and customers’ preferences matter, a comprehensive understanding

of profitability goes beyond sole financial metrics This is when non-financial news involving events such as game releases and updates, partnerships, campaigns, legal matters, or awards and honours can exert noticeable impact

on each company While positive news might generate enhanced financial performance by driving more interest and engagement, negative information can impose adverse consequences on the bottom line

While the impact of non-financial news on the reputation and public perception towards companies has been widely acknowledged, its significance on the financial performance of gaming companies remains an unexplored area of research The constantly evolving gaming industry, characterised by rapid technological advancements and a large customer base, accentuates the need for further examination of the relationship between non-financial news and profitability within such context There have been a number of theoretical and empirical studies

on the influence of non-financial information on financial performance of technology companies However, empirical research studies on the specific gaming sector are not readily available Therefore, this research aims to empirically investigate how non-financial news contributes to the movement of profitability ratios, including Return on Assets (ROA) and Return on Equity (ROE), amongst gaming companies around the world

This research ideology stems from the paper “The Impact of Online Media Coverage on Corporate Performance” written by Haiqing Qin, Haiqi Qin, Yi An, and Jiang Zhu, published on 18 November 2020 The study examines the non-linear correlation between online media coverage and corporate performance, drawing

on the reputation theory and agenda setting theory After researching the data from 1,445 Chinese listed businesses spanning the years 2013 to 2018, the study found

a nonlinear pattern of increase in the association between the duration of media coverage and corporate performance Additionally, the study also discovered that the relationship between the volume of online media coverage and the performance of the firm is not linear or directly proportional, with an unforeseen inverted U-shaped correlation

This also draws certain theories regarding non-financial news from the paper

“Stock Price Reaction to Nonfinancial News in European Technology Companies”

written by Beatriz Cuellar Fernández, Yolanda Fuertes Callén, and José Antonio Laínez Gadea, published on 15 January 2010 In the paper, the authors investigated how the stock market responded to voluntary non-financial information published through media platforms about corporate decisions within 145 European information and communications technology (ICT) firms The findings of the research show that the market does react to published non-financial information, indicating a presence of value relevance In other words, the market considers non-financial information relevant to the valuation of firms

1.2 Objectives of the study

The primary objective of this study is to examine the relationship between financial news and the financial performance of gaming companies worldwide The study will primarily concentrate on the time frame from the first quarter of 2018 to the fourth quarter of 2022 The objectives have been carefully constructed to enable a comprehensive analysis of the intricate relationships within the gaming industry, encompassing various aspects The study seeks to accomplish the following objectives

non-This study initially investigates the attributes of non-financial news, with a specific emphasis on the gaming industry This task entails the classification and description of various classifications of non-financial news that are prevalent and exert a substantial influence within this industry Non-financial news covers a wide range of topics, including news pertaining to products and services, stakeholder relations, management and strategy, legal and regulatory affairs, marketing and public relations, and crisis management

This study explores the increasing importance of non-financial information in relation to financial information and assesses the overall impact of non-financial information on the financial performance and profitability of gaming firms

Following the introductory discussion on the relationship between non-financial information and profitability, this study aims to examine and quantify the influence

of non-financial news in the media on the profitability ratios, specifically ROE and ROA, within the global gaming industry

Accordingly, the study aims to assess the effectiveness of handling and distributing non-financial news within the gaming industry This will involve the most effective strategies and methods employed by successful gaming companies in leveraging non-financial news to improve their financial performance, which helps offer practical recommendations to gaming companies in order to enhance their profitability Furthermore, the study intends to provide gaming companies and related stakeholders with valuable insights and recommendations on the optimal utilisation and potential benefits of non-financial news releases within the gaming sector

1.3 Questions of the research

This research aims to address the following questions in order to comprehensively examine the relationship between different types of non-financial news and the profitability of gaming companies

 Does news on product and service launches or updates have impact on the profitability of gaming companies?

 Does news on product and service delays or cancellations have impact on the profitability of gaming companies?

 Does news on product and service issues have impact on the profitability of gaming companies?

 Does news on client and customer activities have impact on the profitability of gaming companies?

 Does news on stakeholders have impact on the profitability of gaming companies?

 Does news on mergers and acquisitions have impact on the profitability of gaming companies?

 Does news on changes in management or core departments have impact on the profitability of gaming companies?

 Does news on strategic decisions have impact on the profitability of gaming companies?

 Does news on alliance and partnership activities have impact on the profitability

of gaming companies?

 Does news on disposals have impact on the profitability of gaming companies?

 Does news on accusations, allegations, and legal matters have impact on the profitability of gaming companies?

 Does news on promotional and marketing activities have impact on the profitability of gaming companies?

 Does news on awards and distinctions have impact on the profitability of gaming companies?

 Does news on cultural and social activities have impact on the profitability of gaming companies?

1.4 Contribution of the research

This study contributes to the current literature in the field of finance and the gaming industry by analysing the relationship between non-financial news and the financial performance of gaming companies The objective of this study is to establish a connection between these two areas by analysing the impact of non-financial news

on the financial performance of gaming businesses at a worldwide level

While there have been studies investigating the relationship between these two areas, many focus solely on individual news items and neglect the comprehensive disclosure environment of a corporation, which covers its diverse range of activities This study contributes to the expanding academic discourse on the significance of non-financial news by investigating the impact of an extensive range of news articles pertaining to business actions This approach hopes

to mitigate the potential bias associated with research that exclusively concentrate

1.4.2 Offering tangible contributions to the administration and use of financial news

non-This study offers insights for managers, investors, and stakeholders in the gaming industry by analysing various types of non-financial news It aims to identify tactics that may be employed to either utilise or mitigate the effects of such news items

The comprehension of non-financial news can contribute to the achievement of enhanced risk management inside businesses By understanding the significance

of such news, organisations can proactively anticipate and respond to any dangers

or opportunities that may arise from non-financial factors The findings of this research can furthermore provide a valuable contribution to the advancement of strategic planning and decision-making procedures within gaming companies This can assist these organisations in aligning their operations, plans, and marketing activities with the dynamic realm of non-financial information

1.4.3 Providing a comprehensive examination of the impact of non-financial news on the profitability of firms at a worldwide level

The extensive worldwide scope of the research assures that its conclusions possess significant applicability and relevance across many markets and cultural contexts

The chosen time frame, ranging from January 2018 to December 2022, has been intentionally picked to incorporate contemporary trends and advancements This decision ensures that the conclusions of the study are specifically pertinent to the present challenges and prospects within the industry

1.5 Structure of the research

The study comprises five main chapters Apart from the initial introductory chapter, the subsequent chapters of this article are organised in the following manner Chapter 2 entails a comprehensive analysis of the existing literature Chapter 3 presents a comprehensive account of the sample, dataset, and the empirical design and methodology employed in the study Chapter 4 presents a comprehensive study and evaluation of the findings Chapter 5 presents the

principal findings derived from the conducted research

CHAPTER 2: LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT

2.1 Theoretical background of the study

2.1.1 Drivers of firms’ profitability

According to Palepu, Healy and Peek (2022), ROE serves as a comprehensive metric that evaluates a firm's performance, as it assesses the effectiveness of managers in utilising the capital invested by shareholders to generate profitable returns ROE is influenced by two key factors: the efficiency with which it utilises its assets to generate profits, and the size of the company's asset base in relation

to the investment made by shareholders The calculation of ROE can be characterised as:

ROE = Profit or loss

Shareholder's equityROA serves as an indicator of a company's profitability in relation to the amount of assets invested A higher ROA value signifies a more efficient utilisation of assets The utilisation of metrics might be advantageous in the evaluation of a company's profitability across different industries, particularly when there are variations in asset utilisation The determination ROA is as follows:

ROA = Profit or loss

Total assetsROE can be calculated by multiplying ROA by the equity multiplier, which is defined as the how many euros of assets the firm can gain for each euro invested

in its shareholders

ROE = ROA × Equity multiplier = Profit or loss

Total assets ×

Total assetsEquity

It is imperative to acknowledge that a high ROE may signify high profitability; yet,

it could also arise from an overreliance on debt, so posing potential risks The exclusion of debt in the calculation of ROA may provide a comparatively less risky assessment of profitability ROE often receives greater attention from shareholders, however both shareholders and debt holders may analyse ROA, since it provides an assessment of the overall firm performance without considering the specific financing methods employed If ROE exceeds ROA considerably, it could potentially suggest that debt plays a significant role in driving profitability This observation may raise concerns among risk-averse investors 2.1.2 Event study theory

The objective of event study is to assess whether there are any abnormal or excess returns earned by security holders accompanying specific events (e.g., earnings announcements, merger announcements, stock splits) where an abnormal or excess return is the difference between observed return and that appropriate given a particular return generating model In event studies, the event

is often related to the release of information to market participants through the financial press or through corporate releases Other events may be specific corporate actions or government actions (Peterson, 1989)

While event study theory is often associated with the analysis of abnormal returns following specific events, its core principle is about understanding the impact of events on some measure of firm performance Therefore, the theory can also be adapted to investigate other financial metrics of businesses Although this study does not specifically analyse the impact of stock price movements, it does explore the influence of non-financial news events on the financial performance measures of companies This modified version of event study theory enables the examination of both the immediate and long-term effects of non-financial events

on a company's profitability It expands upon the conventional emphasis on rapid stock market responses by incorporating broader effects

2.1 The increasing relevance of non-financial news

Recent studies suggest that the relevance of financial news has experienced a decline in recent years as a result of altering business models The importance of non-financial assets in assessing a company's performance is increasing Consequently, the presentation of non-financial information, which provides more comprehensive and significant insights compared to financial data, is becoming more common in academic and commercial communities Scholars have undertaken inquiries about the significance of non-financial information in relation

to the financial performance of companies

In one study conducted by Graham, Cannice and Sayre (2002), certain financial variables were found to be more relevant to market values of companies, while financial indicators such as net income had less explanatory power for firm value

non-Poroy Arsoy, Bora and Karabiyik (2014) found positive correlations between the subcategories of non-financial information and company financial indicators Additionally, they observed that companies with stronger financial indicator performance also tend to have higher non-financial disclosure scores

A more recent study by Borodin et al (2019) highlighted the distinct impact of publishing non-financial information on financial metrics Specifically, the influence

on ROA appears to have a long-term impact on gains

2.2 The influence of different non-financial news items on firm performance

2.2.1 News on Products and Services

2.2.1.1 News on Product and Service Launches or Updates

The introduction of new products or the upgrades of existing ones are of great significance to firms, especially those operating in high-tech industries This is primarily because technological innovation can offer a potent source of competitive advantage Bayus, Erickson and Jacobson (2003) studied the impact of new product releases

on the personal computer industry and found that the introductions of new products affected profit rates and firm size, hence benefiting firm profitability Lee and Chen (2008) also found in their study that held positive regard towards the promotion and launching of new products to customers A more recent study by Palmer and Truong (2017) showed that there was positive correlation between new product introductions and firm profitability in technological green companies

In another study conducted by Chaney, Devinney and Winer (1991), an analysis of 1,101 public announcements regarding the release of new products between 1975 and 1984 revealed a strong appreciation of innovation by markets Their findings further demonstrated that the initiation of new products is associated with 0.74% abnormal daily returns

On the other hand, there are studies indicating that the launching of new products

in high-tech industries can also cause notable failures in firm performance Rajgopal and Shevlin (2002) pointed out that the market foresees risks tied to new product releases by rival companies or high potentials of new product failure Such foresights can result in a reduction in stock performance of firms

The first hypothesis for the study is:

H1: News on Product and Service Launches or Updates positively impacts gaming

companies’ profitability

2.2.1.2 News on Product and Service Delays and Cancellations

Several existing studies emphasised the multi-faceted influence of product delays and cancellations on firm performance While short term impact on aspects such

as stock prices and operational costs are well-documented, the long-term effects

on profitability are areas needing further research

In one study focusing on a comprehensive sample of 450 publicly traded companies that had delays in introducing their products, Hendricks and Singhal (2008) found a statistically significant adverse impact of these delays on the firms’ profitability, with a more detrimental effect on Return on Assets (ROA) for smaller firms than those that exhibit higher profitability prior to the occurrence of the delay Another study by Korkofingas and Ang (2011) found the negative impact of product delays or cancellation on customers’ trust and assessment of the brand Specifically, their findings indicate that the negative consequences of product-recall incidents are more pronounced for well-known firms compared to less established businesses Furthermore, factors such as the severity of the recall issue and the promptness of the recall notice have an influence on the variations in customer assessments of brand equity, which also affect customers’ post-recall choice

The second hypothesis for the study is:

H2: News on Product and Service Delays and Cancellations negatively impacts

gaming companies’ profitability

2.2.1.3 News on Product and Service Issues

There have been studies that found a decline in customers’ satisfaction and brand equity during periods with faulty products or services, which also negatively influence the repurchase intentions of customers (Roehm and Brady, 2007; Palmer, Beggs and Keown-Mcmullan, 2000)

In a more recent study, Mackelprang, Habermann and Swink (2015) analysed the connections between companies’ product failures and their financial performance and concluded that the presence of such product reliability resulted in unanticipated expenses and additional costs, especially in firms with high levels of innovation According to their study, these product failures seem to cause considerable selling, general, and administrative costs, resulting in diminishing financial performance of firms

The third hypothesis for the study is:

H3: News on Product and Service Issues negatively impacts gaming

companies’ profitability

2.2.2 News on Stakeholder Relations

2.2.2.1 News on Client and Customer Activities

It is pivotal for companies to attain new clients and customers, and this applies heavily to firms running in information and communication technology (ICT) sector Every new technology necessitates a process of gaining widespread acceptance

to cumulate customers, establish a firm position in the market, and then generate profits Simultaneously, firms operating in fast-growing industries must swiftly acquire customers, sometimes regardless of how costly the processes are, to

secure an early lead in the market and establish potent network influence Fernández, Fuertes-Callén and Laínez-Gadea, 2010)

(Cuellar-There have been studies on whether customers’ related information has impact on firm performance, and a number of studies started with the premise that customers are not given enough consideration in conventional financial data, despite customers hold a significant intangible value In one study conducted by Smith and Wright (2004), certain indicators related to customers, including customer satisfaction, customer loyalty, and customer acquisition endeavour, have notable correlation with firm revenue growth and profitability

The fourth hypothesis for the study is:

H4: News on Client and Customer Activities positively impacts gaming

companies’ profitability

2.2.2.2 News on Stakeholders

The growing influence exerted by stakeholders has driven firms to adopt an enhanced understanding of their social responsibilities Consequently, organisations have started to furnish more comprehensive disclosures regarding their ethical conduct during the execution of their operations (Gray, Owen and Adams, 1996) Several event studies have been conducted to examine the influence of these news items on corporate performance

Based on the findings of Berman et al (1999), it has been shown that the financial performance of an organisation is directly influenced by its connections with stakeholders Consequently, cultivating favourable relationships with key stakeholders can contribute to the financial success of a company Furthermore, it was discovered that stakeholder relationships and resource allocation decisions

distribute resources inherently impacts the strength of stakeholder relationships Moreover, these two sets of variables interact with each other, ultimately influencing the financial performance of the firm

Nevertheless, the existing body of research on the effects of ethical activities on stakeholders does not provide definitive conclusions In their study, Hamilton, Jo and Statman (1993) discovered that engaging in ethical activities may lead to a decrease in the rate of return Conversely, Kreander et al (2005) observed no discernible disparity in performance between non-ethical and ethical funds

The fifth hypothesis for the study is:

H5: News on Stakeholders affects gaming companies’ profitability

2.2.2.3 News on Mergers and Acquisitions

The academic community has long been interested in examining the effects of Mergers and Acquisitions (M&A) on firm performance However, there has been relatively little research on the impact of news related to these corporate activities

on financial metrics, such as profitability

Based on a study conducted by Zhang et al (2018), under unchanged circumstances, there is a positive relationship between firm performance and both value-chain-extension M&A and technology-seeking merger and acquisition events Nevertheless, the study did not find a significant correlation between mixed mergers and acquisitions and firm performance

In a more recent study by Rafaqat (2021), the focus was on understanding the influence of M&A activities on the profitability of medium-sized technology companies listed on New York Stock Exchange over the period from 2003 to 2020 The study revealed that the overall profitability of firms decreased, while earnings

per share experienced a significant increase Additionally, return on equity ratios were found to decrease significantly after merger and acquisition activities

The sixth hypothesis for the study is:

H6: News on Mergers and Acquisitions negatively impacts gaming

companies’ profitability

2.2.3 News on Management and Strategy

2.2.3.1 News on Changes in Management or Core Departments

Research on the impact of alterations in corporate management reveals a wide range of conclusions While some say that changes in management have a good impact on corporate performance, others hold the other view, suggesting that variations in the managerial framework indicate a failure in the prior management structure The outcomes of two recent studies conducted by Adeshina Babatunde and Akeju (2016) and Mahrani and Soewarno (2018) demonstrate the positive impact of corporate governance on firm profitability

Bansal and Singh (2022) conducted another study wherein they identified multiple parameters, such as board size, frequency of board meetings, salary, and the nomination committee, that exhibited a favourable influence on multiple company performance metrics On the contrary, there appears to be a lack of correlation between the audit committee and any of the performance measures The research findings also indicated that the phenomenon of CEO duality, wherein the Chief Executive Officer (CEO) concurrently holds the position of chairman, exhibited a noteworthy and adverse correlation with the overall performance of the organisation The presence of board independence is observed to have a

The seventh hypothesis for the study is:

H7: News on Changes in Management or Core Departments positively impacts

gaming companies’ profitability

2.2.3.2 News on Strategic Decisions

Within the realm of technology, the rapid pace of innovation has the potential to accelerate the impact of news on financial performance indicators The quick incorporation of strategic decisions into the stock prices of technology firms can have a more immediate impact on their Return on Assets (ROA) and Return on Equity (ROE) compared to traditional sectors

Many more categories of strategic decisions have been examined by researchers Some of the key variables include modifications in strategic plans such as the diversification of markets and products, alterations in accounting or commercial policies, and enhancements in management systems Nevertheless, the examination of how news influences strategic decision-making and its subsequent effects on corporate performance is still an issue that warrants further investigation Andersen (2001) discovered a significant correlation between strategic decision-making and financial profitability in a particular study In industries characterised

by heightened dynamism and complexity, the integration of strategic making methodologies with innovation has been observed to be positively correlated with elevated levels of profitability and sales growth

decision-In their study Baum and Wally (2003) investigated the impact of strategic decision speed on the later performance of firms Their findings provided empirical evidence

to support the notion that rapid strategic decision-making is positively associated with future business growth and profitability

The eighth hypothesis for the study is:

H8: News on Strategic Decisions positively impacts gaming companies’ profitability

2.2.3.3 News on Alliances and Partnership Activities

Within the technology industry, decisions on how to establish alliances and partnerships frequently attract considerable scrutiny from diverse stakeholders, including investors The following dissemination of news and publicity can exert both short-term and long-term impacts on the performance of a corporation, particularly with regard to its profitability, Return on Assets (ROA), and Return on Equity (ROE) The current collection of literature pertaining to the financial implications of alliances and partnerships in technology corporations highlights certain areas that warrant further investigation

Several empirical investigations have been undertaken to examine the influence of alliances on financial markets Nevertheless, there is a lack of agreement over the findings by Anand and Khanna (2000) conducted a study that yielded favourable findings, however Oum et al (2004) observed that horizontal partnerships did not exhibit significant or beneficial effects on total profitability In a further investigation, Bayona, Corredor and Santamaría (2004) conducted an examination and determined that the revelation of technological partnerships did not elicit a substantial market reaction Nevertheless, an increase in market volatility was observed, a phenomenon that might be attributed to the enterprises' imperative to form strategic alliances in order to safeguard their market standing

The ninth hypothesis for the study is:

H9: News on Alliances and Partnership Activities affects gaming companies’ profitability

2.2.3.4 News on Disposals

The disposal of assets, divisions, or subsidiaries is a critical strategic decision for technology firms, often met with varying degrees of attention and interpretation from stakeholders According to Shleifer and Vishny (1989), disposals can create value through reductions in agency costs or an increase in specialisation

A research done by Wiles, Morgan and Rego (2012) investigates the impact of brand disposal announcements, in which their findings indicate that the impact of announcements on returns is significantly influenced by three firm assets, including marketing capabilities, channel partnerships, and brand portfolios Moreover, sellers that have weaker channel ties and sell various brands, particularly those with lower price or quality positioning compared to the rest of their portfolio, as well

as brands that are unrelated to the seller's existing portfolio, tend to see higher abnormal returns

The tenth hypothesis for the study is:

H10: News on Disposals affects gaming companies’ profitability

2.2.4 News on Legal and Regulatory Affairs

2.2.4.1 News on Accusations, Allegations, and Legal Matters

The act of disseminating accusations and allegations about a company can have significant detrimental effects, including reputational harm, erosion of customer trust, and ultimately financial decline A recent empirical study undertaken Yagci Sokat and Altay (2023) has provided evidence supporting the notion that accusations made against enterprises do actually exert an adverse effect on their financial performance However, it was also discovered that the influence is not of

a prolonged kind

The spread of published information pertaining to a firm's legal affairs can exert a complex and frequently adverse influence on the firm's overall financial performance The potential consequences encompass a spectrum of immediate financial hardships and reputational harm, as well as enduring modifications to strategic and operational aspects

According to the research conducted by Wu et al (2020), there is a correlation between claims of lawsuit involving significant financial amounts and a decrease

in firm performance The research findings also revealed that the presence of lawsuit risk had an adverse effect on company performance, which was mediated

by various factors including increased borrowing, higher costs of debt, lower availability of bank loans, and decreased trade credit

Malm, Soyeh and Kanuri (2023) argued that companies that are confronted with legal actions encounter a range of obstacles These challenges encompass restrictions on accessing external funding, diversion of top management's attention, adverse impacts on reputation, heightened legal expenditures, and the possibility of losing customers and suppliers Consequently, these factors have the potential to exert a negative influence on the overall performance of such firms The findings of their research indicate that enterprises involved in legal conflicts experience a decline in their operational performance, as demonstrated by decreased return on assets (ROA) and return on equity (ROE)

The eleventh hypothesis for the study is:

H11: News on Accusations, Allegations, and Legal Matters negatively impacts

gaming companies’ profitability

2.2.5 News on Marketing and Public Relations

2.2.5.1 News on Promotional and Marketing Activities

According Robert C Blattberg (1990), it is common for corporations to initiate marketing efforts in order to enhance their profitability and overall value When comparing the introduction of new items, these actions are relatively easier to carry out and can have an immediate effect on sales, while posing a lower level of risk Agrawal and Kamakura (1995) conducted a study wherein they saw a favourable market reaction towards modifications in company names and the utilisation of celebrity endorsements in promotional activities A study conducted by Pettengill, Sundaram and Mathur (1995) demonstrates that the announcement of modifications in advertising slogans has the potential to significantly enhance a company's worth

Nevertheless, scholarly discourse has been centred around the impact of advertising and promotional efforts on the overall performance of firms In a more recent study conducted by Pettengill, Sundaram and Mathur (1995), it was discovered that augmenting advertising efforts yielded varied benefits on profitability, while intensifying promotional activities had a detrimental impact on earnings The research findings also demonstrated a beneficial impact of advertising on "brand equity", while promotional campaigns were found to have negative consequences

The twelfth hypothesis for the study is:

H12: News on Promotional and Marketing Activities affects gaming

companies’ profitability

2.2.5.2 News on Awards and Distinctions

The receipt of awards can have a favourable impact on a company's profitability

by means of several routes, including the enhancement of reputation, recruitment

of investors, motivation of employees, marketing advantages, and acquisition of new customers In a study conducted by Paphawasit, Surapee and Suwan (2019), the researchers examined the impact of the Start Up Energy Transition Award (SET) on the Return on Equity (ROE) of 107 firms that were listed on the Stock Exchange of Thailand over the period from 2009 to 2017 The findings of the study revealed a positive correlation between the Best Company Performance Award and the ROE On the contrary, Paphawasit, Surapee and Suwan (2019) argued that the relationship between quality certification and recognition and organisational success is not statistically significant

The thirteenth hypothesis for the study is:

H13: News on Awards and Distinctions positively impacts gaming

companies’ profitability

2.2.5.3 News on Cultural and Social Activities

Several studies have been conducted to examine the relationship between corporate cultural and social activities and their financial performance However, there are not readily available related research on the specific technology or gaming industry

In a study conducted by Lee and Jung (2016), the objective was to evaluate the impact of corporate social responsibility on the financial performance of organisations The findings indicate that the correlation between cultural and social activities and financial performance is contingent upon the degrees of product

diversification and external investment These contingent variables serve to amplify the impact of these activities on the financial performance of organisations

The fourteenth hypothesis for the study is:

H14: News on Cultural and Social Activities positively impacts gaming

companies’ profitability

2.2.6 News on Crisis Management

2.2.6.1 News on Issue Management

While news about how a firm manages its issues can help maintain brand reputation and increase customer trust and loyalty, the direct influence of corporate crisis and issue management on firm profitability remains an unexplored area of study

As stated by Tucker and Melewar (2005), when potential crises are identifiable, the implementation of appropriate issue management strategies can prevent a crisis from adversely affecting the organisation The proper management of issues and reputation can result in efficient crisis management, ultimately leading to the enhancement of business reputation

The fifteenth hypothesis for the study is:

H15: News on Issue Management affects gaming companies’ profitability

CHAPTER 3: RESEARCH METHODOLOGY

3.1 Sample and data collection

The sample for this study included publicly listed gaming companies all around the world for the period 2018-2022 The study used the CompaniesMarketcap website (https://companiesmarketcap.com) to extract a list of 200 largest gaming companies by capitalisation First, firms that were not listed on the stock market during the period of January 2018 to December 2022 were excluded Next, the study removed any corporations that operate solely in media and entertainment industry The remaining companies include firms that operate in developing or distributing digital games and companies that manufacture video game consoles Then, companies with insufficient data on ROA and ROE ratios within the designated period were discarded After the application of these criteria, the final sample for the study comprised of 52 publicly listed gaming companies in Japan (17), Poland (8), China (4), South Korea (6), United States (6), Taiwan (4), Sweden (4), Singapore (1), Finland (1), Italy (1), Thailand (1) If the company has multiple listings, the study selected its main market

Data for corporate performance of gaming companies are derived from the Orbis database Specifically, the data includes quarterly ROA and ROE ratios of the selected gaming companies from January 2018 to December 2022 The study extracted ROA and ROE ratios calculated with Net Income from the database, as they can reflect a comprehensive picture of the companies’ profitability

The data for non-financial news items were hand-collected with the assistance of advanced filtering tools on Google search engine News items published on online gaming news sites were gathered to create the database for relevant non-financial

Non-financial news of each category occurring per period was counted and stored into the dataset Out of the total 2565 non-financial news items, the majority referred to News on Product and Service Launches or Updates (1180 news items) and News on Promotional and Marketing Activities (475 news items) The other more common news occurring were News on Strategic Decisions (138 news items), News on Alliance and Partnership Activities (137 news items), News on Alliance and Partnership Activities (121 news items), News on Mergers and Acquisitions (102 news items), and News on Product and Service Delays or Cancellations (101 news items)

3.2 Research design and variable definition

3.2.1 Variables

3.2.1.1 Dependent variables

The dependent variable in this study is corporate profitability Two indicators are chosen to measure firm profitability The indicators covered within this category consist of Return on Equity (ROE and Return on Assets (ROA)

The Return on Assets (ROA) metric quantifies the effectiveness with which a corporation utilises its assets to create profits The calculation involves dividing the net income by the average total assets for the period This provides a comprehensive overview of both profitability and asset utilisation

The Return on Equity (ROE) metric quantifies the effectiveness with which a corporation utilises its equity capital to create profits The calculat ion involves dividing the net income by the shareholders' equity This indicator offers valuable insights regarding the worth of shareholders and the financial well-being of the organisation

3.2.1.2 Independent variables

Table 1 describes the variables used to investigate the relationship between

corporate non-financial news and profitability reactions To comprehensively assess the impact of non-financial news on the profitability of gaming firms, the variables are categorised into different common types of non-financial information released by the media related to the gaming industry

Panel A displays Product-Related News, including News on Product and Service Launches or Updates, News on Product and Service Delay or Cancellation, and News on Product and Service Issues

Panel B displays Stakeholder Relations News, including News on Clients and Customers, News on Stakeholders, and News on Mergers and Acquisitions

Panel C displays Management and Strategy News, including News on Changes in Management or Core Departments, News on Strategic Decisions, News on Alliance and Partnership Activities, and News on Disposals

Panel D displays Legal and Regulatory Affairs The sole examined topic is News

on Allegations and Legal Matters

Panel E displays Marketing and Public Relations News, including News on Promotional and Marketing Activities, News on Awards and Distinctions, and News

on Cultural and Social Activities

Panel F displays Crisis Management News, including News on Issue Management of gaming companies

Detailed descriptions of each variable, with their symbols for the model,

and news title examples for each variable are listed in Table 1

Table 1: Description of Independent Variables

Variables and Description Symbol Examples in the dataset

Panel A: Product-Related News

News on Product and Service Launches

or Updates

Counts of news stories focusing on new

product or service launches, or updates of

existing products or services

Counts of news stories highlighting delays

or cancellations in product or service

offerings

PSD Blizzard and NetEase

cancel World of Warcraft mobile game

News on Product and Service Issues

Counts of news stories discussing issues

such as bugs, server downtimes, or other

functional problems

PSI CD PROJEKT RED

gaming studio hit by ransomware attack

Panel B: Stakeholder Relations News

News on Client and Customer Activities

Counts of news stories related to the

company’s acquisition of new clients or

Counts of news stories discussing

company activities with employees and

other stakeholders

SH CD Projekt promises

'more humane' Cyberpunk 2077 crunch than devs endured for The Witcher 3

News on Mergers and Acquisitions

Counts of news stories discussing

company mergers, acquisitions, or

spin-offs

MA NetEase acquires

Grasshopper Manufacture

Panel C: Management and Strategy News

News on Changes in Management or

Core Departments

Counts of news stories announcing

changes in management structure or core

departments

MC Activision Blizzard Chief

Compliance Officer Frances Townsend Has Stepped Down

News on Strategic Decisions

Counts of news stories discussing

short-term or long-short-term strategic plans, changes

SD PlayStation Reportedly

Now Requiring Developers to Create 2-Hour Game Trials