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The Corporate Governance Role of the Media: Evidence from Russia

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  • Alexander Dyck

    (University of Toronto)

  • Natalya Volchkova

    (New Economic School/CEFIR)

  • Luigi Zingales

    (Harvard University, NBER, and CEPR)

Abstract

We study the effect of media coverage on corporate governance outcomes by focusing on Russia in the period 1999-2002. Russia provides a setting with multiple examples of corporate governance abuses, where traditional corporate governance mechanisms are ineffective, and where we can identify an exogenous source of news coverage arising from the presence of an investment fund, the Hermitage fund, that tried to shame companies by exposing their abuses in the international media. We find that the probability that a corporate governance abuse is reversed is affected by the coverage of the news in the Anglo-American press. The result is not due to the endogeneity of news reporting since this result holds even when we instrument media coverage with the presence of the Hermitage fund among its shareholders and the “natural” newsworthiness of the company involved. We confirm this evidence with a case study.

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Bibliographic Info

Paper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number w0054.

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Length: 51 pages
Date of creation: Oct 2004
Date of revision: Sep 2005
Handle: RePEc:cfr:cefirw:w0054

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  1. Gregory S. Miller, 2006. "The Press as a Watchdog for Accounting Fraud," Journal of Accounting Research, Wiley Blackwell, vol. 44(5), pages 1001-1033, December.
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  7. Douglas W. Diamond, 1998. "Reputation Acquisition in Debt Markets," Levine's Working Paper Archive 602, David K. Levine.
  8. Alexander Dyck & Adair Morse & Luigi Zingales, 2010. "Who Blows the Whistle on Corporate Fraud?," Journal of Finance, American Finance Association, vol. 65(6), pages 2213-2253, December.
  9. Diamond, Douglas W, 1991. "Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 689-721, August.
  10. Sendhil Mullainathan & Andrei Shleifer, 2002. "Media Bias," NBER Working Papers 9295, National Bureau of Economic Research, Inc.
  11. Alexander Dyck & Luigi Zingales, 2002. "The Corporate Governance Role of the Media," NBER Working Papers 9309, National Bureau of Economic Research, Inc.
  12. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
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