Political Connections, Media Coverage, and Corporate Violations
37 Pages Posted: 20 Jan 2020
Date Written: November 28, 2019
We investigate how political connections of public firms in China influence the media coverage of corporate violations. We find that corporate violations committed by politically-connected firms receive less negative media coverage than violations committed by non-politically-connected firms. The effect is more pronounced for firms receiving more attention from the market-oriented media. We employ the scandal involving the largest Chinese market-oriented business newspaper as an exogenous shock to establish a causal link. We further find that less negative media coverage of corporate violations is associated with longer duration of the violation being investigated and being enforced. We interpret our findings to suggest that corporate political connections suppress negative media coverage of corporate misconduct, and the suppression serves as a channel through which firms keep receiving benefits from their political ties.
Keywords: Political Connections, Media Coverage, and Corporate Violations
JEL Classification: G31, G32, G34
Suggested Citation: Suggested Citation