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The Corporate Governance Role of the Media: Evidence from Russia

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  • Dyck, Alexander

    (U of Toronto)

  • Volchkova, Natalya

    (New Economic School)

  • Zingales, Luigi

    (U of Chicago)

Abstract

We study the effect of media coverage on corporate governance by focusing on Russia in the period 1999-2002. This setting offers us three ideal conditions for such a study: plenty of corporate governance violations, no alternative mechanisms to address them, and the presence of an investment fund (the Hermitage) that actively lobbies the international press to shame companies perpetrating those violations. We find that Hermitage's lobbying is effective in increasing the coverage of corporate governance violations in the Anglo-American press. We also find that coverage in the Anglo-American press increases the probability that a corporate governance violation is reversed: one more article increases the probability of reversal by 5 percentage points. This effect is present even when we instrument coverage with an exogenous determinant, i.e. the Hermitage's portfolio composition at the beginning of the period. The Hermitage's strategy seems to work in part by impacting Russian companies' reputation abroad and in part by forcing regulators into action.

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Bibliographic Info

Paper provided by University of Pennsylvania, Wharton School, Weiss Center in its series Working Papers with number 07-1.

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Date of creation: Feb 2007
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Handle: RePEc:ecl:upafin:07-1

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  1. Sendhil Mullainathan & Andrei Shleifer, 2005. "The Market for News," American Economic Review, American Economic Association, vol. 95(4), pages 1031-1053, September.
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  7. Dyck, Alexander & Morse, Adair & Zingales, Luigi, 2007. "Who Blows the Whistle on Corporate Fraud?," CEPR Discussion Papers 6126, C.E.P.R. Discussion Papers.
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