Media coverage and investment efficiency

Xin Gao, Weidong Xu, Donghui Li, Lu Xing

Research output: Contribution to journalArticlepeer-review

40 Citations (SciVal)


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 languageEnglish
Pages (from-to)270-293
Number of pages24
JournalJournal of Empirical Finance
Early online date9 Jul 2021
Publication statusPublished - 30 Sept 2021


  • CEO overconfidence
  • Corporate governance
  • Information asymmetry
  • Investment efficiency
  • Media coverage

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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