Abstract
We examine the effect of media coverage on firm-level investment efficiency. We find that media coverage reduces under-investment but increases over-investment. The negative effect of media coverage on under-investment is more pronounced in firms affected by greater information asymmetry and poorer corporate governance. The positive effect of media coverage on over-investment is driven by media-induced CEO overconfidence. Additional results show that both investment- and non-investment-related news coverage decrease under-investment, while non-investment-related news coverage is more influential in increasing over-investment. In general, higher news optimism is associated with less under-investment but more over-investment. Moreover, media coverage affects investment efficiency through its information dissemination rather than information creation function. Collectively, our results suggest that firms’ media visibility promotes more over-investment than under-investment.
| Original language | English |
|---|---|
| Pages (from-to) | 270-293 |
| Number of pages | 24 |
| Journal | Journal of Empirical Finance |
| Volume | 63 |
| Early online date | 9 Jul 2021 |
| DOIs | |
| Publication status | Published - 30 Sept 2021 |
Keywords
- CEO overconfidence
- Corporate governance
- Information asymmetry
- Investment efficiency
- Media coverage
ASJC Scopus subject areas
- Finance
- Economics and Econometrics