Protecting the Giant Pandas: Newspaper Censorship of Negative News

58 Pages Posted: 13 Jan 2017 Last revised: 18 Apr 2018

Ole-Kristian Hope

University of Toronto - Rotman School of Management

Yi Li

Hunan University

Qiliang Liu

Wuhan University - School of Economics and Management

Han Wu

HEC Paris

Date Written: April 5, 2018

Abstract

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

Suggested Citation

Hope, Ole-Kristian and Li, Yi and Liu, Qiliang and Wu, Han, Protecting the Giant Pandas: Newspaper Censorship of Negative News (April 5, 2018). 2017 Canadian Academic Accounting Association (CAAA) Annual Conference; 28th Annual Conference on Financial Economics and Accounting. Available at SSRN: https://ssrn.com/abstract=2897758 or http://dx.doi.org/10.2139/ssrn.2897758

Ole-Kristian Hope (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

HOME PAGE: http://www.rotman.utoronto.ca/FacultyAndResearch/Faculty/FacultyBios/Hope.aspx

Yi Li

Hunan University ( email )

2 Lushan South Rd
Changsha, Hunan 410082
United States

Qiliang Liu

Wuhan University - School of Economics and Management ( email )

Wu Han, Hu-Bai 430072
China

Han Wu

HEC Paris ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

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