Media Coverage and Firm Valuation: Evidence from China

Abstract

Drawing on both a managerial-discipline perspective and an information-intermediary perspective, we explore how media coverage of a firm’s controlling shareholder influences firm valuation in corporate China. Using 366 listed family firms in China from 2003–2006, we find that firms in which controlling shareholders receive more neutral media reports enjoy higher valuation, whereas negative media reports on controlling shareholders impose adverse effects on firm valuation. Interestingly, favorable media coverage of the controlling shareholders does not enhance firm value. Further analyses reveal that ownership structure and audit quality moderate the relationship between media coverage and firm valuation. Our study complements the emerging literature on the monitoring role of the media on the stock markets.

Keywords: Media Coverage, Valuation, Family Firms, China

JEL Classification: G30, L25, M41