Don't Believe the Hype: Local Media Slant, Local Advertising, and Firm Value
Umit G. Gurun
University of Texas at Dallas
Alexander W. Butler
Rice University - Jesse H. Jones Graduate School of Business
May 18, 2011
Journal of Finance, Forthcoming
AFA 2010 Atlanta Meetings Paper
When local media report news about local companies, they use fewer negative words compared to the same media reporting about non-local companies. We document that one reason for this positive slant is due to the firms’ local media advertising expenditures. Abnormal positive local media slant strongly relates to firm equity values. The effect is stronger for small firms, firms held predominantly by individual investors, and firms with illiquid or highly volatile stock, low analyst following, or high dispersion of analyst forecasts. These findings show that news content varies systematically with the characteristics and conflicts of interest of the source.
Number of Pages in PDF File: 48
Keywords: Media Slant, Location, Media, Advertising, Firm ValueAccepted Paper Series
Date posted: January 29, 2009 ; Last revised: June 10, 2011
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