Protecting the Giant Pandas: Newspaper Censorship of Negative News
61 Pages Posted: 13 Jan 2017 Last revised: 17 Jan 2018
Date Written: January 17, 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 the Chinese censorship authorities restrict the dissemination of tunneling news on state-owned enterprises, firms with greater numbers of employees, and large taxpayers. We show that a surprising magnitude of local protectionism and cross-provincial competition drive the behaviors of provincial-level censors - tunneling firms are two to five times less likely to be covered by in-province newspapers compared to out-of-province newspapers. Importantly, our results reveal that 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 find that investors put more weight 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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