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

Abstract

Institutional investors increasingly hold substantial equity stakes in both media companies and industrial firms. When industrial firms become defendants in corporate litigation, media companies that are simultaneously held by these institutional investors provide more lenient coverage of the defendants. This effect becomes more pronounced when institutions have greater incentive and ability to exert influence over the media companies. Influenced media outlets also reduce their coverage of the defendants, especially that related to legal matters. After the lenient coverage, institutional investors increasingly vote in favor of the management of these media companies, suggesting a quid-pro-quo relationship between the two parties. Our findings indicate that media outlets slant their coverage of corporate litigation to cater to large shareholders. 

Keywords: Institutional investors, media incentives, media tone, corporate litigation, cross-holdings

JEL Classification: G14, G23, G32, L82, M41