Protecting the Giant Pandas: Newspaper Censorship of Negative News
56 Pages Posted: 13 Jan 2017 Last revised: 26 Jan 2019
Date Written: January 24, 2019
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
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