Common Business Group Affiliation and Media Bias

Abstract

We find that newspapers connected to firms through common business group affiliation display a more positive reporting tone than unconnected newspapers. This result is robust to both a DiD approach and controlling for newspaper-firm pair fixed effects. Further, the association between connected newspapers’ reporting tone and firm stock returns is weaker. The reporting bias is more pronounced when business groups have greater incentives and power to influence the newspapers and when firms can benefit more from positive media coverage. Finally, we show that connected newspapers play a weaker information intermediary role and firms with connected newspapers have poorer information environments. Overall, our evidence suggests that media-firm connections via common business group affiliation undermine the media’s independence and objectivity.

Keywords: Business Group Affiliation, Media Ownership, Media Objectivity, Media Bias

JEL Classification: G32, G34, L82, M41