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Media Partisanship and Fundamental Corporate Decisions

Published online by Cambridge University Press:  26 August 2021

April Knill ,
Baixiao Liu  and
John J. McConnell
April Knill
Affiliation:
Florida State University College of Businessaknill@fsu.edu
Baixiao Liu*
Affiliation:
Peking University HSBC Business School
John J. McConnell
Affiliation:
Purdue University Krannert Graduate School of Managementmcconnj@purdue.edu
*
baixiaoliu@phbs.pku.edu.cn (corresponding author)
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Abstract

Using the introduction of Fox News as a natural experiment, we investigate whether partisanship in television news coverage influences fundamental corporate decisions. We find that during the George W. Bush presidency, firms led by Republican-leaning managers headquartered in regions into which Fox was introduced shift upward their total investment expenditures and financial leverage. Our findings imply that in making fundamental corporate decisions, Republican-leaning managers are swayed by the Republican slant of Fox that presents an optimistic macroeconomic outlook. The results highlight the importance of heterogeneity in media slant in understanding the role of the media in corporate decision making.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 57 , Issue 2 , March 2022 , pp. 572 - 598
Copyright
© The Author(s), 2021. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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Footnotes

We thank Kenneth Ahern, Pat Akey, Ian Appel, Meghana Ayyagari, Thorsten Beck, Nicole Boyson, Daniel Bradley, Nerissa Brown, Alex Butler, Paul Calluzzo, Tony Cookson, Douglas Cumming, Stefano DellaVigna, Casey Dougal, Ran Duchin, Art Durnev, Ted Enamorado, Nandini Gupta, Irena Hutton, Noyan Ilk, Danling Jiang, Sofia Johan, Brandon Julio, Lawrence Kryzanowski, Alok Kumar, Stefan Lewellen, John Lott, Vojislav Maksimovic, Paul Malatesta (the editor), Hernan Ortiz-Molina, Gordon Phillips, Nagpurnanand Prabhala, Orkun Saka, Pablo Slutsky, Denis Sosyura, Patrick Sun, Tracy Yue Wang (the referee), Jide Wintoki, Norman Wyckoff, and Chris Yung. We also thank presentation and workshop participants at Sichuan University, the Southwestern University of Finance and Economics, the 2019 Midwest Finance Association meeting, the 2019 Applied Financial Management Association Meeting, the 2019 China International Conference in Finance, the 2019 Academy of Behavioral Finance & Economics Meeting, the 2019 Financial Management Association Meeting, the 2019 Southern Finance Association Meeting, the 2020 American Finance Association Meeting, the 2020 London Political Finance Workshop, the 2020 Northern Finance Association Conference, and the 2020 Federal Communications Commission Meeting.

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