The Corporate Governance Role of the Media: Evidence from Russia
75 Pages Posted: 25 Sep 2006 Last revised: 23 Sep 2010
Date Written: September 2006
We study the effect of media coverage on corporate governance by focusing on Russia in the period 1999-2002. This setting offers us three ideal conditions for such a study: plenty of corporate governance violations, no alternative mechanisms to address them, and the presence of an investment fund (the Hermitage) that actively lobbies the international press to shame companies perpetrating those violations. We find that Hermitageâ€TMs lobbying is effective in increasing the coverage of corporate governance violations in the Anglo-American press. We also find that coverage in the Anglo-American press increases the probability that a corporate governance violation is reversed. This effect is present even when we instrument coverage with an exogenous determinant, i.e. the Hermitageâ€TMs portfolio composition at the beginning of the period. The Hermitageâ€TMs strategy seems to work in part by impacting Russian companiesâ€TM reputation abroad and in part by forcing regulators into action.
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