News Media Coverage and Corporate Leverage Adjustments

90 Pages Posted: 26 Jan 2018 Last revised: 7 Oct 2019

See all articles by Tung Lam Dang

Tung Lam Dang

The University of Danang

Viet Anh Dang

Alliance Manchester Business School

Fariborz Moshirian

Institute of Global Finance, UNSW Business School

Lily Nguyen

The University of Queensland - UQ Business School

Bohui Zhang

The Chinese University of Hong Kong, Shenzhen

Date Written: October 6, 2019

Abstract

We examine the impact of the media on firms’ leverage adjustments. Using a comprehensive sample of global news across 33 countries, we find that greater news coverage and more positive news sentiment are associated with greater leverage adjustment speeds. This finding is consistent with the argument that media coverage and content help lower the cost of firms’ adjustment toward target leverage. We further find evidence supporting two mechanisms through which the news media affects leverage adjustments: information dissemination and monitoring. Overall, our results are consistent with the dynamic trade-off theory of capital structure.

Keywords: Media Coverage; Capital Structure; Speed of Leverage Adjustment; Trade-off Theory

JEL Classification: G30; G32; G12; G15

Suggested Citation

Dang, Tung Lam and Dang, Viet Anh and Moshirian, Fariborz and Nguyen, Lily and Zhang, Bohui, News Media Coverage and Corporate Leverage Adjustments (October 6, 2019). Journal of Banking and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3109477 or http://dx.doi.org/10.2139/ssrn.3109477

Tung Lam Dang

The University of Danang ( email )

41 Le Duan street
Danang
Vietnam

Viet Anh Dang (Contact Author)

Alliance Manchester Business School ( email )

AMBS Crawford House
Booth Street West
Manchester, Greater Manchester M15 6PB
United Kingdom
+44(0)16127 50438 (Phone)

Fariborz Moshirian

Institute of Global Finance, UNSW Business School ( email )

Sydney, NSW 2052
Australia
+61 2 93855859 (Phone)
+61 2 94877519 (Fax)

Lily Nguyen

The University of Queensland - UQ Business School ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Bohui Zhang

The Chinese University of Hong Kong, Shenzhen ( email )

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