Alternative Corporate Governance: Domestic Media Coverage of Mergers and Acquisitions in China
48 Pages Posted: 11 Jun 2014 Last revised: 5 May 2015
Date Written: May 4, 2015
A text analysis of domestic Chinese newspaper articles on 797 proposed mergers shows that media in developing countries are quantifiably susceptible to pressure: media coverage is more favorable for deals consistent with government objectives and involving powerful local firms. However, we also find that media tone can affect the outcome of proposed M&A deals by informing the market. We identify this effect using the exogenous shock to market-driven governance from the Split-Share Structure Reform in 2007. Negative tone during negotiation coverage also predicts long-term performance for the bidder. Despite biased coverage, domestic media in developing countries can function as an alternative channel for corporate governance.
Keywords: Mergers and acquisitions, media bias, text categorization, corporate governance, China
JEL Classification: G34, G14, O16, L82
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