Alternative Corporate Governance: Domestic Media Coverage of Mergers and Acquisitions in China

48 Pages Posted: 11 Jun 2014 Last revised: 5 May 2015

See all articles by Paul Borochin

Paul Borochin

University of Miami - Department of Finance

Cu Weihua

Xiangtan University

Date Written: May 4, 2015

Abstract

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

Suggested Citation

Borochin, Paul and Weihua, Cu, Alternative Corporate Governance: Domestic Media Coverage of Mergers and Acquisitions in China (May 4, 2015). Available at SSRN: https://ssrn.com/abstract=2448392 or http://dx.doi.org/10.2139/ssrn.2448392

Paul Borochin (Contact Author)

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

Cu Weihua

Xiangtan University ( email )

International Exchange Center
Hunan, Hunan 411105
China

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