News Media Coverage and Corporate Leverage Adjustments
90 Pages Posted: 26 Jan 2018 Last revised: 7 Oct 2019
Date Written: October 6, 2019
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: Suggested Citation