Friends at WSJ
69 Pages Posted: 4 Jun 2018 Last revised: 10 Nov 2020
Date Written: November 10, 2020
I study the effect of firm–journalist connections on media slant using a dataset on firm connections to Wall Street Journal (WSJ) reporters. When corporate events are covered by connected authors, the news sentiment becomes markedly more favorable, leading to higher stock returns. For identification, I instrument connected coverage using reporter turnover and find similar results. Moreover, using Rupert Murdoch’s acquisition of the WSJ as an exogenous shock to journalistic independence, I show that firms connected to Murdoch receive better coverage after the ownership change. Additional evidence suggests that journalist connections have a distorting effect on capital allocation.
Keywords: News Sentiment, Mergers and Acquisitions, Financial Journalism, Social Connections
JEL Classification: D03, G02, G34
Suggested Citation: Suggested Citation