Moderating the connections: media coverage and firm market value
ISSN: 1472-0701
Article publication date: 10 October 2022
Issue publication date: 10 April 2023
Abstract
Purpose
The purpose of this paper is to explore how a politically connected firm moderates the relationship between media coverage and market value. More specifically, the authors are interested in the interplay of an external corporate governance (CG) mechanism with an internal one. By interacting different mechanisms, this paper advances the empirical setting of application and functions of the corporate governance.
Design/methodology/approach
This paper tests the hypotheses presented using panel data with a fixed-effect model, by assembling and exploiting a unique, hand-collected set of data on media coverage consisting of over 164,000 media reports and a politically connected board of directors comprising over 12,000 CVs tracked from 2010 to 2014. Data is originally from Brazil, a country where political connections are highly used by firms and that has been a place of much research on corporate political activity.
Findings
The results of this paper suggest that a politically connected board of directors can mitigate the negative effects of media coverage on market value. Overall, the results imply that the validity of a CG mechanism might be affected by other mechanisms.
Research limitations/implications
The findings of this paper imply the need for research focusing on the mutual effects of different CG mechanisms. While CG is understood as a set of mechanisms, new research could focus on the interplay of these mechanisms.
Practical implications
The findings suggest that the presence of former politicians and government officers on the board dissipates bad news reported by the media and boosts market value when media is positive. To maximize investment returns, investors should analyze firms' political human capital.
Originality/value
To the best of the authors’ knowledge, this paper is the first to develop hypotheses on the moderation effects of a politically connected board on the relation between media coverage and market value. This is relevant because this brings insights on how firms could jointly manage these mechanisms.
Keywords
Acknowledgements
The authors would like to thank Professor Ian MacMillan (The Wharton School) for the feedback given during the first steps of this paper. They also wish to thank the participants and anonymous reviewers of the Academy of Management Meeting, in Atlanta, 2017(Global Paper Workshop Development) and Boston, 2019 and the feedback from the participants of the 2019 Wharton Global Faculty Development, Philadelphia – PA. Finally, the authors would like to acknowledge the financial support from the Fulbright Commission (US, Project: 054/2014) and the Conselho Nacional de Pesquisa – CNPq (Brazil, Project: 438943/2018–0).
Citation
Gama, M.A.B., Lana, J., Bueno, G., Marcon, R. and Bandeira-de-Mello, R. (2023), "Moderating the connections: media coverage and firm market value", Corporate Governance, Vol. 23 No. 3, pp. 607-627. https://doi.org/10.1108/CG-02-2022-0068
Publisher
:Emerald Publishing Limited
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