Social connections between media and firm executives and the properties of media reporting
- PDF / 607,045 Bytes
- 39 Pages / 439.37 x 666.142 pts Page_size
- 84 Downloads / 216 Views
Social connections between media and firm executives and the properties of media reporting Yi Ru 1 & Jian Xue 2 & Yuan Zhang 3
& Xin
Zhou 4
# Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract We study how social connections between top executives of media and listed firms affect the properties of media reporting. We find that socially connected media are significantly more likely to cover a firm than their unconnected counterparts. Their reporting is significantly more optimistically toned and contains significantly less information, and both of these effects are significantly mitigated when the firm has better information environment as represented by greater analyst coverage and larger firm size. Additional analyses show that characteristics of the underlying news, firm, or media also affect the effects of social connections on media reporting properties. Collectively, our evidence suggests the impairment of media independence when media and firms have social connections and the importance of alternative information sources in mitigating this effect. Keywords Social ties . Media coverage . Media tone . Information JEL classifications G14 . L82 . M41 . Z13
* Jian Xue [email protected] Yi Ru [email protected] Yuan Zhang [email protected] Xin Zhou [email protected]
1
Business School, Renmin University of China, Beijing, China
2
School of Economics and Management, Tsinghua University, Beijing, China
3
Naveen Jindal School of Management, University of Texas at Dallas, Richardson, TX, USA
4
XY Investments, Shanghai, China
Y. Ru et al.
“If news is clean, the society would be dirty; if news is dirty, the society would be clean.” —A popular quote on the Internet in China
1 Introduction The media play important roles in the capital market, and the foundation of these roles lies in media independence. A media watchdog group, Fairness and Accuracy in Reporting (FAIR), notes that the independence of media can be undermined by conflicts of interest inherent in commercial, political, religious, and social connections.1 The literature focuses on the implications of conflicts of interest related to the media’s readers, advertisers, and the government (e.g. Reuter and Zitzewitz 2006; Gentzkow and Shapiro 2006, 2010; Gurun and Butler 2012; Piotroski et al. 2017; You et al. 2018). What has received much less attention is the effect of the media’s social connections on its reporting. Thus, we study how the social connections between executives of media and firms influence media reporting. Social connections may affect media reporting in one of two ways. On the one hand, social connections give the media greater access to value-relevant information about the connected firm, and, at the same time, firms may feel more comfortable providing private or proprietary information to connected media. Either way, connected media are likely to have an information advantage that can generate news reports that are more precise and informative about the firm. We label this effect the in
Data Loading...
