MEDIA COVERAGE, POLITICAL CONNECTIONS AND CORPORATE RISK

Abstract

Media coverage, as an important part of the external corporate governance mechanism, plays an important guiding role in corporate behavior patterns and public opinion. Taking A-share listed companies of Shanghai Stock Exchange and Shenzhen Stock Exchange from 2012 to 2017 as research examples, this paper analyzed how media coverage and political connections exert influence on corporate risk in an empirical study approach. This paper makes the following conclusions. First, the media, as information medium and external participant of the company, significantly lower the listed company’s corporate risk through closed media coverage. Second, the closer connection a company has with government, the higher corporate risk it encounters and, in the meantime, less effect of media coverage’s aversion effect towards corporate risk. Third, based on a further research on the nature of company’s property rights, this paper revealed that in state-owned companies, close political connections weaken much more media coverage’s aversion effect towards corporate risk than that in private companies.