The Effect of Media-Linked Directors on Financing and External Governance

54 Pages Posted: 7 Mar 2016 Last revised: 1 Jul 2020

See all articles by Alberta Di Giuli

Alberta Di Giuli

ESCP

Paul A. Laux

University of Delaware - Alfred Lerner College of Business and Economics

Date Written: June 1, 2020

Abstract

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

Di Giuli, Alberta and Laux, Paul A., The Effect of Media-Linked Directors on Financing and External Governance (June 1, 2020). Available at SSRN: https://ssrn.com/abstract=2742312 or http://dx.doi.org/10.2139/ssrn.2742312

Alberta Di Giuli

ESCP ( email )

Paris Campus
79, Avenue de la Republique
Paris, 75011
France

Paul A. Laux (Contact Author)

University of Delaware - Alfred Lerner College of Business and Economics ( email )

Office 306 Purnell Hall
Newark, DE 19716
United States
302-831-6598 (Phone)
302-831-3061 (Fax)

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