Common Business Group Affiliation and Media Bias

59 Pages Posted: 23 Jul 2020 Last revised: 30 Jul 2020

See all articles by Yi Ru

Yi Ru

Tsinghua University

Fei Xie

University of Delaware - Lerner College of Business and Economics; European Corporate Governance Institute (ECGI)

Jian Xue

Tsinghua University - School of Economics & Management

Date Written: July 18, 2020

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

Suggested Citation

Ru, Yi and Xie, Fei and Xue, Jian, Common Business Group Affiliation and Media Bias (July 18, 2020). European Corporate Governance Institute – Finance Working Paper No. 691/2020, Available at SSRN: https://ssrn.com/abstract=3655874 or http://dx.doi.org/10.2139/ssrn.3655874

Yi Ru

Tsinghua University

Beijing, 100084
China

Fei Xie (Contact Author)

University of Delaware - Lerner College of Business and Economics ( email )

42 Amstel Ave
Newark, DE 19716
United States
(302) 8313811 (Phone)

HOME PAGE: http://sites.google.com/site/feisresearch/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Jian Xue

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

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