Journal of Financial and Quantitative Analysis Vol. 55 No. 2 2020

Media Coverage and the Cost of Debt

Haoyu Gao^1,2,3,4; Junbo Wang^1,2,3,4; Yanchu Wang^1,2,3,4; Chunchi Wu^1,2,3,4; Xi Dong^1,2,3,4

¹ City University of Hong Kong · ² Shanghai University of Finance and Economics · ³ University at Buffalo, State University of New York · ⁴ Renmin University of China

Abstract

This paper investigates the relation between media coverage and offering yield spreads using a comprehensive dataset of 5,338 industrial bonds issued from 1990 to 2011. We find that media coverage is negatively associated with firms’ cost of debt. This association is robust to controlling for standard yield determinants, different model specifications, and endogeneity. We identify 4 economic channels through which media coverage influences the cost of debt: Information asymmetry, governance, liquidity, and default risk. Importantly, media coverage has an independent influence beyond the effects of these economic mechanisms and is not a proxy for other firm attributes.

DOI

10.1017/s0022109019000024

Volume

55

Issue

2

Pages

429-471

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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