Gao, X., Xu, W., Li, D. and Xing, L. (2021) Media coverage and investment efficiency. Journal of Empirical Finance, 63, pp. 270-293. (doi: 10.1016/j.jempfin.2021.07.002)
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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.
| Item Type: | Articles |
|---|---|
| Additional Information: | Acknowledgements: 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). |
| Status: | Published |
| Refereed: | Yes |
| Glasgow Author(s) Enlighten ID: | Xing, Dr Lu |
| Creator Roles: | Xing, L.Conceptualization, Methodology, Formal analysis, Writing – original draft, Writing – review and editing |
| Authors: | Gao, X., Xu, W., Li, D., and Xing, L. |
| College/School: | College of Social Sciences > Adam Smith Business School > Accounting and Finance |
| Journal Name: | Journal of Empirical Finance |
| Publisher: | Elsevier |
| ISSN: | 0927-5398 |
| ISSN (Online): | 1879-1727 |
| Published Online: | 09 July 2021 |
| Copyright Holders: | Copyright © 2021 Elsevier B.V. |
| First Published: | First published in Journal of Empirical Finance 63: 270-293 |
| Publisher Policy: | Reproduced in accordance with the publisher copyright policy |
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