The Power Behind the Pen: Institutional Investors’ Influence on Media during Corporate Litigation

Abstract

Institutional investors increasingly own equity blocks of both media companies and industrial firms. When industrial firms become defendants of corporate litigation, these institutions nudge media companies they simultaneously blockhold to provide more lenient coverage about the defendants. Doing so props up market sentiment and mitigates negative price impact – benefiting institutions’ portfolios. This strategy is more prominent when institutions are activists and pay closer attention to litigation events. Following the lenient coverage, institutions gradually exit positions in troubled defendant firms and begin to vote more favorably toward the media’s management. Overall, media outlets seem to slant their coverage of corporate litigation to cater to their large shareholders.

Keywords: Institutional investors, media incentives, media tone, corporate litigation