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News media coverage and corporate leverage adjustments

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  • Dang, Tung Lam
  • Dang, Viet Anh
  • Moshirian, Fariborz
  • Nguyen, Lily
  • Zhang, Bohui

Abstract

We examine the impact of the media on firms’ leverage adjustments. Using a comprehensive sample of global news across 33 countries, we find that greater news coverage and more positive news sentiment are associated with greater leverage adjustment speeds. This finding is consistent with the argument that media coverage and content help lower the cost of firms’ adjustment toward target leverage. We further find evidence supporting two mechanisms through which the news media affects leverage adjustments: information dissemination and monitoring. Overall, our results are consistent with the dynamic trade-off theory of capital structure.

Suggested Citation

  • Dang, Tung Lam & Dang, Viet Anh & Moshirian, Fariborz & Nguyen, Lily & Zhang, Bohui, 2019. "News media coverage and corporate leverage adjustments," Journal of Banking & Finance, Elsevier, vol. 109(C).
    • Handle: RePEc:eee:jbfina:v:109:y:2019:i:c:s0378426619302419
    DOI: 10.1016/j.jbankfin.2019.105666
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    Keywords

    Media coverage; Capital structure; Speed of leverage adjustment; Trade-off theory;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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