Firm-level Media Coverage, Bank Loan, and the Role of Institutional Environments
61 Pages Posted:
Date Written: February 2, 2020
Employing an international sample of 12,422 bank loan facilities across 37 countries spanning 2000-2016, we investigate the impact of firm-level media coverage on bank loan pricing and the role of institutional environments. We find that both media coverage and positive media sentiment reduce the bank loan interest rate spread, which can be achieved by media’s roles in mitigating information frictions, reducing information risks, and enhancing the competition among lenders. We further document that this negative relationship is more pronounced in countries with better accounting and trading information environments, higher representation of privately owned media newspapers, and lower government control of banks. Our main conclusions remain valid after carefully taking into account endogeneity issues and conducting various robustness tests.
Keywords: Loan Pricing; Media Coverage; Media Sentiment; Information Environment
JEL Classification: G32; G15
Suggested Citation: Suggested Citation