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Don't Believe the Hype: Local Media Slant, Local Advertising, and Firm Value

48 Pages Posted: 29 Jan 2009 Last revised: 10 Jun 2011

Umit G. Gurun

University of Texas at Dallas

Alexander W. Butler

Rice University - Jesse H. Jones Graduate School of Business

Date Written: May 18, 2011

Abstract

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.

Keywords: Media Slant, Location, Media, Advertising, Firm Value

Suggested Citation

Gurun, Umit G. and Butler, Alexander W., Don't Believe the Hype: Local Media Slant, Local Advertising, and Firm Value (May 18, 2011). Journal of Finance, Forthcoming; AFA 2010 Atlanta Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1333765

Umit G. Gurun (Contact Author)

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

Alexander W. Butler

Rice University - Jesse H. Jones Graduate School of Business ( email )

MS 531
Houston, TX 77005
United States
713-348-6341 (Phone)

HOME PAGE: http://www.owlnet.rice.edu/~awbutler/

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