The Impact of Media Independence On Firm Performance: A Panel Data Analysis From Emerging Markets

Abstract

Can media have any influence on firm performance? Do firms in countries with more independent media perform better than firms with less independent media? This paper seeks to answer these questions by documenting the relationship between media independence and firm performance in emerging markets. Using a dataset from twenty seven emerging markets, we show significantly better performance of firms headquartered in countries with relatively more independent media than firms headquartered in countries with relatively less independent media during the period between 2007 and 2011. We argue that independent media reduces information asymmetries for stock market participants. Consequently, it is more difficult for managers to expropriate, thereby improving performance of firms. Our results indicate that media can play a substitute role for traditional governance mechanisms in emerging markets.