48 Pages Posted: 29 Jan 2009 Last revised: 10 Jun 2011
Date Written: May 18, 2011
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: 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
By Paul Tetlock
By Feng Li