Protecting the Giant Pandas: Newspaper Censorship of Negative News
58 Pages Posted: 13 Jan 2017 Last revised: 18 Apr 2018
Date Written: April 5, 2018
We investigate newspaper censorship of firm-level negative news using a rare setting in which many companies were involved in similar tunneling scandals. We find that state-owned enterprises, large employers, and large taxpayers are less likely to be covered by tunneling news. We further show a surprising magnitude of local protectionism by provincial-level censors - tunneling firms are 1.5 to 5.5 times less likely to be covered by in-province newspapers compared to out-of-province newspapers. Importantly, the tunneling news that is reported leads to negative market reactions, and the reactions are significantly greater for firms held primarily by retail investors. We also document that, under the local censorship policy, investors rely more on tunneling news reported by out-of-province media than by in-province media.
Keywords: Censorship, Media, Newspapers, China, Social and Economic Incentives, Local Protection, Information Environment, Market Reactions
JEL Classification: D83, F23, G30, G34, J50, M10, M16, M41, M48, N25, N45, O53
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