The Eﬀect of Media-Linked Directors on Financing and External Governance
54 Pages Posted: 7 Mar 2016 Last revised: 1 Jul 2020
Date Written: June 1, 2020
Firms sharing a board member with a media company receive more news coverage.
This in turn aﬀects those ﬁrms’ ﬁnancing choices: they issue more bonds, rely less on
bank loans, and have lower blockholder ownership. These ﬁndings are consistent with
media coverage acting as an external governance mechanism that substitutes for the
monitoring by banks and equity blockholders. The eﬀect of media-linked directors on
ﬁnancing is evident in cross-section and time-series change analyses and in two diﬀerent
instrumental variable analyses, suggesting a causal relationship.
Keywords: Media-linked directors, media coverage, ﬁnancing choices
JEL Classification: G34, G32
Suggested Citation: Suggested Citation