The Role of The Media in Corporate Governance: Evidence From Shareholder Proposals

Abstract

This paper examines the role played by the media in the shareholder proposal process. We find a positive relation between media coverage and the likelihood to be targeted by governance proposals. The effect is mostly concentrated in proposals submitted by non-institutional shareholders and driven by negative news. Negative media coverage is also associated with the success of proposals and changes in executive compensation and board turnover. Instrumental variable analysis and tests exploiting local newspaper closures suggest that the relationship between media coverage and shareholder proposals is causal. Our results shed light on a new channel through which the media can play a corporate governance role.

Keywords: Media Coverage, Corporate News, Shareholder Proposals, Corporate Governance

JEL Classification: G14, G30, G32, G41