TY - JOUR
T1 - Media coverage and investment efficiency
AU - Gao, Xin
AU - Xu, Weidong
AU - Li, Donghui
AU - Xing, Lu
N1 - Funding Information:
Acknowledgments: Weidong Xu acknowledges funding from the National Natural Science Foundation of China (Grant No. 71771197 and No. 71821002 ). Donghui Li would like to thank the National Natural Science Foundation of China for financial support (Grant No. 71873058 ). We thank Jiaqing Ding for excellent research assistance.
PY - 2021/9/30
Y1 - 2021/9/30
N2 - 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.
AB - 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.
KW - CEO overconfidence
KW - Corporate governance
KW - Information asymmetry
KW - Investment efficiency
KW - Media coverage
UR - http://www.scopus.com/inward/record.url?scp=85111185966&partnerID=8YFLogxK
U2 - 10.1016/j.jempfin.2021.07.002
DO - 10.1016/j.jempfin.2021.07.002
M3 - Article
AN - SCOPUS:85111185966
SN - 0927-5398
VL - 63
SP - 270
EP - 293
JO - Journal of Empirical Finance
JF - Journal of Empirical Finance
ER -