Media Coverage and the Cost of Debt

Haoyu Gao; Junbo Wang; Yanchu Wang; Chunchi Wu; Xi Dong

doi:10.1017/S0022109019000024

Media Coverage and the Cost of Debt

Haoyu Gao
, Junbo Wang
, Yanchu Wang
, Chunchi Wu
, Xi Dong

Finance

Renmin University of China
City University of Hong Kong
Shanghai University of Finance and Economics
City University of New York

Research output: Contribution to journal › Review article › peer-review

143 Scopus citations

Abstract

This paper investigates the relation between media coverage and offering yield spreads using a comprehensive dataset of 5,338 industrial bonds issued from 1990 to 2011. We find that media coverage is negatively associated with firms' cost of debt. This association is robust to controlling for standard yield determinants, different model specifications, and endogeneity. We identify 4 economic channels through which media coverage influences the cost of debt: Information asymmetry, governance, liquidity, and default risk. Importantly, media coverage has an independent influence beyond the effects of these economic mechanisms and is not a proxy for other firm attributes.

Original language	English
Pages (from-to)	429-471
Number of pages	43
Journal	Journal of Financial and Quantitative Analysis
Volume	55
Issue number	2
DOIs	https://doi.org/10.1017/S0022109019000024
State	Published - Mar 1 2020

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title = "Media Coverage and the Cost of Debt",

abstract = "This paper investigates the relation between media coverage and offering yield spreads using a comprehensive dataset of 5,338 industrial bonds issued from 1990 to 2011. We find that media coverage is negatively associated with firms' cost of debt. This association is robust to controlling for standard yield determinants, different model specifications, and endogeneity. We identify 4 economic channels through which media coverage influences the cost of debt: Information asymmetry, governance, liquidity, and default risk. Importantly, media coverage has an independent influence beyond the effects of these economic mechanisms and is not a proxy for other firm attributes.",

author = "Haoyu Gao and Junbo Wang and Yanchu Wang and Chunchi Wu and Xi Dong",

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N2 - This paper investigates the relation between media coverage and offering yield spreads using a comprehensive dataset of 5,338 industrial bonds issued from 1990 to 2011. We find that media coverage is negatively associated with firms' cost of debt. This association is robust to controlling for standard yield determinants, different model specifications, and endogeneity. We identify 4 economic channels through which media coverage influences the cost of debt: Information asymmetry, governance, liquidity, and default risk. Importantly, media coverage has an independent influence beyond the effects of these economic mechanisms and is not a proxy for other firm attributes.

AB - This paper investigates the relation between media coverage and offering yield spreads using a comprehensive dataset of 5,338 industrial bonds issued from 1990 to 2011. We find that media coverage is negatively associated with firms' cost of debt. This association is robust to controlling for standard yield determinants, different model specifications, and endogeneity. We identify 4 economic channels through which media coverage influences the cost of debt: Information asymmetry, governance, liquidity, and default risk. Importantly, media coverage has an independent influence beyond the effects of these economic mechanisms and is not a proxy for other firm attributes.

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Media Coverage and the Cost of Debt

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