Protecting the Giant Pandas: Newspaper Censorship of Negative News

56 Pages Posted: 13 Jan 2017 Last revised: 26 Jan 2019

See all articles by Ole-Kristian Hope

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: January 24, 2019

Abstract

Media dissemination has an important function to facilitate price discovery, while any political pressure that restricts information dissemination could hinder this function and affect investor perception. We investigate the magnitude and economic consequences of newspaper censorship, which blocks further dissemination of firm-disclosed information, using a Chinese setting of “tunneling” scandals. We 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. Tunneling news reported by the heavily-censored local sources has lost information content and investors instead rely more on tunneling news reported by the less-censored media. Censorship “protects” firms through helping them avoid tunneling coverage that could have led to negative market reactions.

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 (January 24, 2019). 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, CA Hunan 410082
China

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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