The Impact of Celebrity News on Entertainment Industry Stock Prices

Abstract

South Korea’s entertainment industry has gained global popularity. However, the competition between entertainment companies is intense, requiring strategies to ensure their survival, such as imposing restrictions on their artists to maintain their public image and trust. This study examined the impacts of celebrity news and activities on the stock returns of six major entertainment companies listed on the Korea Exchange (KRX) from 2018 to 2021. Using the Fama/French 3 Factors Model regression, the study investigated the presence of abnormal returns. The findings indicate that comebacks and debuts elicit positive reactions and generate significant abnormal returns. Award acceptances and military service also elicit positive reactions but do not generate significant abnormal returns. Conversely, dating news, internal scandals, and national scandals elicit negative reactions, with only national scandals generating significant abnormal returns. These results imply that entertainment companies and investors should actively manage and monitor celebrity news to make informed decisions.