Firm-level Media Coverage, Bank Loan, and the Role of Institutional Environments

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Zhehao Jia

University of Glasgow

Donghui Li

UNSW Australia Business School, School of Banking and Finance

Yukun Shi

University of Glasgow; University of Leicester

Lu Xing

University of Glasgow

Date Written: February 2, 2020

Abstract

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

Jia, Zhehao and Li, Donghui and Shi, Yukun and Xing, Lu, Firm-level Media Coverage, Bank Loan, and the Role of Institutional Environments (February 2, 2020). Available at SSRN: https://ssrn.com/abstract=

Zhehao Jia (Contact Author)

University of Glasgow ( email )

Adam Smith Business School
Glasgow, Scotland G12 8LE
United Kingdom

Donghui Li

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

Yukun Shi

University of Glasgow ( email )

Adam Smith Business School
Glasgow, Scotland G12 8LE
United Kingdom

University of Leicester ( email )

University Road
Leicester, LE1 7RH
United Kingdom

Lu Xing

University of Glasgow ( email )

Adam Smith Business School
Glasgow, Scotland G12 8LE
United Kingdom

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