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Media Coverage and Firm Valuation: Evidence from China

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Abstract

Drawing on both a managerial discipline perspective and an information intermediary perspective, we explore how media coverage of a firm’s controlling shareholder influences firm valuation in corporate China. Using 366 listed family firms in China from 2003 to 2006, we find that firms in which controlling shareholders receive more neutral media reports enjoy higher valuation, whereas negative media reports on controlling shareholders impose adverse effects on firm valuation. Interestingly, favorable media coverage of the controlling shareholders does not enhance firm value. Further analyses reveal that ownership structure and audit quality moderate the relationship between media coverage and firm valuation. Our study complements the emerging literature on the monitoring role of the media on the stock markets.

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Acknowledgments

The authors acknowledge the valuable comments received from Qiang Cheng, Xia Chen, and seminar participants at Jinan University, the American Accounting Association 2012 Conference in Washington DC, the Eastern Finance Association 2012 Conference in Boston and the 2011 China International Symposium on Empirical Accounting Research in Kunming. Wang acknowledges the financial support through a research grant (C206/MSS9A006) from the Office of Research, Singapore Management University. Ye acknowledges the support of the National Natural Science Foundation of China (Approval No. 71072145 and 70532002).

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Correspondence to Kangtao Ye.

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Wang, J., Ye, K. Media Coverage and Firm Valuation: Evidence from China. J Bus Ethics 127, 501–511 (2015). https://doi.org/10.1007/s10551-014-2055-5

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  • DOI: https://doi.org/10.1007/s10551-014-2055-5

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