Can Media Exposure Improve Stock Price Efficiency in China and Why?

65 Pages Posted: 8 Oct 2015

See all articles by Jeong-Bon Kim

Jeong-Bon Kim

City University of Hong Kong

Zhongbo Yu

Shenzhen Stock Exchange Research Institute

Hao Zhang

University of Macau - Faculty of Business Administration

Date Written: September 2015

Abstract

The media in China has undergone extensive commercialization to become more market-driven over the last 35 years. Based on a sample of over two million newspaper articles, this study investigates whether the media in China has an incremental impact on stock price efficiency. We find that as media coverage of a firm increases: (1) its stock price synchronicity decreases, (2) the probability of informed trading of its stock increases and (3) the extent to which its stock price deviates from random walk decreases. Our inter-regional analysis over thirty-one provinces/regions within China reveals that the effects of the media on decreasing stock price synchronicity, increasing the probability of informed trading, and reducing stock price deviation from random walk are stronger in regions of weaker institutional development. Our findings suggest that a market-driven media can play the role of compensating for the underdeveloped governance institutions in transitional economies such as China.

Keywords: media exposure, stock price efficiency, China

JEL Classification: G14, G30

Suggested Citation

Kim, Jeong-Bon and Yu, Zhongbo and Zhang, Hao, Can Media Exposure Improve Stock Price Efficiency in China and Why? (September 2015). Available at SSRN: https://ssrn.com/abstract=2670482 or http://dx.doi.org/10.2139/ssrn.2670482

Jeong-Bon Kim

City University of Hong Kong ( email )

Department of Accountancy
83 Tat Chee Avenue
Kowloon Tong
Hong Kong
852-3442-7909 (Phone)

Zhongbo Yu

Shenzhen Stock Exchange Research Institute ( email )

Shenzhen
China

Hao Zhang (Contact Author)

University of Macau - Faculty of Business Administration ( email )

Macau

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