Firm-Level Media Coverage, Bank Loans, and the Role of Institutional Environments

77 Pages Posted: 24 Jun 2020 Last revised: 15 Mar 2022

See all articles by Zhehao Jia

Zhehao Jia

University of Plymouth - Plymouth Business School

Donghui Li

UNSW Australia Business School, School of Banking and Finance

Yukun Shi

University of Glasgow

Lu Xing

University of Glasgow

Date Written: December 30, 2021

Abstract

Employing an international sample of 12,422 bank loan facilities across 37 countries spanning the period from 2000-2016, we find that both media coverage and positive media sentiment reduce the bank loan interest rate spread, which can be achieved through the media’s roles in mitigating information frictions, reducing information risks, and enhancing the competition among lenders. Moreover, we show that favourable aggregate media sentiment increases the participation probability of non-leader bank lenders and reduces the percentage share of the leading banks involving syndicated loan issuances to borrowers, which implies the information feedback effects of media sentiment in the syndicate loan structure. We further document that this negative relationship is more pronounced in countries with better financial information and governance environments, higher representation of privately owned media newspapers, and lower government control of banks. Our main conclusions remain valid after carefully considering endogeneity issues and conducting various robustness tests.

Keywords: Loan Pricing, Media Coverage, Media Sentiment, Institutional Environment

JEL Classification: G32; G15

Suggested Citation

Jia, Zhehao and Li, Donghui and Shi, Yukun and Xing, Lu, Firm-Level Media Coverage, Bank Loans, and the Role of Institutional Environments (December 30, 2021). Available at SSRN: https://ssrn.com/abstract=3615757 or http://dx.doi.org/10.2139/ssrn.3615757

Zhehao Jia (Contact Author)

University of Plymouth - Plymouth Business School ( email )

229b Cookworthy Building
Plymouth, Devon PL4 8AA
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

Lu Xing

University of Glasgow ( email )

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

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