The Media Goes Where It's Needed: The Relation between Firms' Investor Base and Media Coverage

52 Pages Posted: 21 Mar 2022 Last revised: 17 Oct 2022

See all articles by Nicholas M. Guest

Nicholas M. Guest

Cornell University - Samuel Curtis Johnson Graduate School of Management

Ashish Ochani

Cornell University, Samuel Curtis Johnson Graduate School of Management, Department of Accounting

Mani Sethuraman

Cornell University

Date Written: August 29, 2022

Abstract

We provide evidence that a firm’s investor base is a key factor in determining its media coverage. Using a large sample of U.S. public companies spanning the period 2000-2019, we find that firm-specific media coverage is negatively associated with leverage. Our results suggest the media caters relatively more to equity investors, who largely rely on public information, than to debt investors, who are often privy to privileged information. We arrive at similar conclusions when we exploit plausibly exogenous changes in investor base and investor access to privileged information. Among debt investors, the media appears to cater to public bond holders more than private banks. Among equity investors, the media appears to cater to quasi-index institutions. Additionally, cross-sectional variation in media coverage based on investment and article types reveals that the media’s role is far more nuanced than previously documented. Overall, our findings suggest that financial media coverage is significantly influenced by less sophisticated professional investors’ demand for information to help monitor firms.

Keywords: financial media, leverage, institutional ownership, investor base, banks, monitoring

JEL Classification: G20, G21, G23, G34, M40, M41

Suggested Citation

Guest, Nicholas M. and Ochani, Ashish and Sethuraman, Mani, The Media Goes Where It's Needed: The Relation between Firms' Investor Base and Media Coverage (August 29, 2022). Available at SSRN: https://ssrn.com/abstract=4051960 or http://dx.doi.org/10.2139/ssrn.4051960

Nicholas M. Guest (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

342 Sage Hall
Ithaca, NY 14853
United States

Ashish Ochani

Cornell University, Samuel Curtis Johnson Graduate School of Management, Department of Accounting ( email )

Ithaca, NY
United States

HOME PAGE: http://www.ochaniashish.com

Mani Sethuraman

Cornell University ( email )

Ithaca, NY 14853
United States

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