Firm-level media news, bank loans, and the role of institutional environments

Zhehao Jia; Donghui Li; Yukun Shi; Lu Xing

doi:10.1016/j.jcorpfin.2023.102491

Firm-level media news, bank loans, and the role of institutional environments

Zhehao Jia, Donghui Li, Yukun Shi, Lu Xing

Research output: Contribution to journal › Article › peer-review

3 Citations (SciVal)

Abstract

Employing an international sample of bank loans from 37 countries, we find that both borrowers' intensive media coverage and positive media sentiment reduce the interest rate spreads on bank loans. In syndicated lending, positive media sentiment increases the likelihood of a non-relationship bank leading or participating in a loan syndicate and decreases the loan share of the lead arranger. Furthermore, we demonstrate that the negative impact of media news on loan spreads is more pronounced in countries with better financial information and governance environments, a higher representation of privately owned media, and lower government control of banks. These findings underscore the significance of media coverage and sentiment in shaping the costs of bank loans worldwide.

Original language	English
Article number	102491
Journal	Journal of Corporate Finance
Volume	83
Early online date	23 Sept 2023
DOIs	https://doi.org/10.1016/j.jcorpfin.2023.102491
Publication status	Published - 31 Dec 2023

Bibliographical note

Data availability:
Data will be made available on request.

Funding

This paper is based on one chapter of the PhD thesis by Zhehao Jia. Everyone has equal contribution towards the formation of this paper. For any questions, please contact the corresponding authors Donghui Li and Yukun Shi. We thank the editor, Morten Bennedsen, and an anonymous referee for helpful comments and suggestions. We also thank Ning Gao, Pantelis Kazakis, Scott Richardson, Cheng Yan, Lizhengbo Yang, conference participants at the Chinese Economics Association (Europe/UK) 2020 Annual Conference and the International Risk Management Virtual Conference 2020, as well as seminar participants at the University of Edinburgh, University of Glasgow, University of Western Australia, Jiangxi University of Finance and Economics, and Xi'an Jiaotong-Liverpool University for helpful comments and discussions. Donghui Li would like to thank the National Natural Science Foundation of China for financial support (Grant No. 71873058 and 72373099 ). All errors are our own. This paper is based on one chapter of the PhD thesis by Zhehao Jia. Everyone has equal contribution towards the formation of this paper. For any questions, please contact the corresponding authors Donghui Li and Yukun Shi. We thank the editor, Morten Bennedsen, and an anonymous referee for helpful comments and suggestions. We also thank Ning Gao, Pantelis Kazakis, Scott Richardson, Cheng Yan, Lizhengbo Yang, conference participants at the Chinese Economics Association (Europe/UK) 2020 Annual Conference and the International Risk Management Virtual Conference 2020, as well as seminar participants at the University of Edinburgh, University of Glasgow, University of Western Australia, Jiangxi University of Finance and Economics, and Xi'an Jiaotong-Liverpool University for helpful comments and discussions. Donghui Li would like to thank the National Natural Science Foundation of China for financial support (Grant No. 71873058 and 72373099). All errors are our own.

Keywords

Loan pricing
Media coverage
Media sentiment
Institutional environment

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10.1016/j.jcorpfin.2023.102491Licence: CC BY

Cite this

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title = "Firm-level media news, bank loans, and the role of institutional environments",

abstract = "Employing an international sample of bank loans from 37 countries, we find that both borrowers' intensive media coverage and positive media sentiment reduce the interest rate spreads on bank loans. In syndicated lending, positive media sentiment increases the likelihood of a non-relationship bank leading or participating in a loan syndicate and decreases the loan share of the lead arranger. Furthermore, we demonstrate that the negative impact of media news on loan spreads is more pronounced in countries with better financial information and governance environments, a higher representation of privately owned media, and lower government control of banks. These findings underscore the significance of media coverage and sentiment in shaping the costs of bank loans worldwide.",

keywords = "Loan pricing, Media coverage, Media sentiment, Institutional environment",

author = "Zhehao Jia and Donghui Li and Yukun Shi and Lu Xing",

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doi = "10.1016/j.jcorpfin.2023.102491",

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AU - Jia, Zhehao

AU - Li, Donghui

AU - Shi, Yukun

AU - Xing, Lu

N1 - Data availability: Data will be made available on request.

PY - 2023/12/31

Y1 - 2023/12/31

N2 - Employing an international sample of bank loans from 37 countries, we find that both borrowers' intensive media coverage and positive media sentiment reduce the interest rate spreads on bank loans. In syndicated lending, positive media sentiment increases the likelihood of a non-relationship bank leading or participating in a loan syndicate and decreases the loan share of the lead arranger. Furthermore, we demonstrate that the negative impact of media news on loan spreads is more pronounced in countries with better financial information and governance environments, a higher representation of privately owned media, and lower government control of banks. These findings underscore the significance of media coverage and sentiment in shaping the costs of bank loans worldwide.

AB - Employing an international sample of bank loans from 37 countries, we find that both borrowers' intensive media coverage and positive media sentiment reduce the interest rate spreads on bank loans. In syndicated lending, positive media sentiment increases the likelihood of a non-relationship bank leading or participating in a loan syndicate and decreases the loan share of the lead arranger. Furthermore, we demonstrate that the negative impact of media news on loan spreads is more pronounced in countries with better financial information and governance environments, a higher representation of privately owned media, and lower government control of banks. These findings underscore the significance of media coverage and sentiment in shaping the costs of bank loans worldwide.

KW - Loan pricing

KW - Media coverage

KW - Media sentiment

KW - Institutional environment

U2 - 10.1016/j.jcorpfin.2023.102491

DO - 10.1016/j.jcorpfin.2023.102491

M3 - Article

SN - 0929-1199

VL - 83

JO - Journal of Corporate Finance

JF - Journal of Corporate Finance

M1 - 102491

ER -

Firm-level media news, bank loans, and the role of institutional environments

Abstract

Bibliographical note

Funding

Keywords

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Cite this