Review of Financial Studies Vol. 31 No. 1 2018
Who Captures the Power of the Pen?
Abstract
We study how political capture affects the corporate governance role of the media. Relying on a unique media market in China that is characterized by the prevalence of both state-controlled and market-oriented media, we manually construct a comprehensive financial news sample containing 80,008 articles during the 2004–2010 period and provide evidence that negative coverage by the market-oriented media significantly increases the chance of forced top executive turnover, whereas similar coverage by the state-controlled media has no such impact. A multi-pronged approach that includes an instrumental variable test, an exogenous event, firm fixed effects, and change-in-change specifications provides positive evidence of the casual link. Further analysis reveals that the disciplinary effect of the market-oriented media is stronger for firms that are less likely to be influenced by political capture, such as non-state-owned firms or firms located in provinces with good institutions.
- DOI
- 10.1093/rfs/hhx055
- Volume
- 31
- Issue
- 1
- Pages
- 43-96
- Language
- en
- Sources
- openalex crossref