The Department of Finance and FRIC, Center for Financial Frictions, are proud to announce the upcoming seminar with Benjamin Golez, Mendoza College of Business, University of Notre Dame.
Benjamin Golez will present:
Home-country media slant and equity prices
Do national newspapers slant the presentation of the news to cater to the preferences of their home-country readers? If so, does media slant affect investor behavior across countries? We address these questions by analyzing media coverage of the automotive industry in the US, Germany, and Japan. We use detailed news data, coded by trained native speakers, covering over 190,000 newspaper articles on auto manufacturers during 2007–2016. We find that national newspapers report systematically more favorably about home auto manufacturers than about foreign auto manufacturers. Results hold across all countries, for a subset of large national newspapers, and for each country pair. The evidence is robust to controlling for selective media coverage and various supply-side effects. The home-country media slant is strongest for news that is more difficult to verify, and it becomes substantially higher during bad times for companies, such as around major auto scandals, on the announcement days of car recalls, and at times of low market valuations. We also find confirming evidence for catering to home readers in international editions of the Wall Street Journal. The home-country media slant appears to have a strong effect on equity investors. Differences in media reporting across countries predict stock price deviations of cross-listed stocks. An investment strategy of “betting against the home media” yields abnormal monthly returns in excess of 2%. Differences in media reporting across countries predict stock price deviations of cross-listed stocks. The effect is strongest when investors are more likely to pay attention to published news, and it is absent on days when investors are distracted by sports events.
Solbjerg Plads 3,