Media Independence And Firm Performance: Evidence From Emerging Stock Markets

Abstract

Can media have any influence on firm performance? Do firms incountries with more independent media perform better than firms with lessindependent media? This paper seeks to answer these questions and aims todocument the relationship between media independence and firm performance inemerging markets. Using a dataset fromtwenty-four emerging markets, we show a significantly positive relationshipbetween media independence and firm performance. We argue that independentmedia reduces information asymmetries for stock market participants.Consequently, it becomes hard for managers to expropriate, thereby improvingperformance of firms. We also show that the relationship between mediaindependence and firm performance is more pronounced in firms that have higheragency problem. For instance, our results show stronger impact of mediaindependence on firms with no dividend payouts, no analyst coverage,concentrated ownership, and higher level of operational complexity. It showsthat media can play a substitute for traditional governance mechanisms inemerging markets.