The impact of news sentiment on corporate value

This study investigates how news sentiment affects firm valuation in China’s A-share market, a unique institutional environment characterized by extensive state intervention and media oversight. Drawing on a comprehensive dataset of 20,150 firm-year observations from 2012 to 2023, this study examines this relationship using two-way fixed-effects models. Our findings reveal a statistically significant and economically meaningful association between news sentiment and Tobin’s Q. We identify three key transmission channels through which this effect occurs. Mediation analysis demonstrates that news sentiment affects firm value by shaping investor sentiment, reducing financing constraints, and strengthening corporate reputation. This effect varies across firm types, with a considerably stronger impact for smaller firms that face greater information opacity. By contrast, state ownership significantly weakens the sentiment–value relationship, suggesting that government backing and market skepticism toward state-controlled media weaken the informational content of news coverage for state-owned enterprises. These results withstand extensive robustness testing, including instrumental-variable estimation, Heckman selection models, propensity score matching, and system generalized method-of-moments estimation. This research advances our understanding of the media’s economic role in emerging markets by documenting the pathways linking sentiment to value and by highlighting how institutional features shape these dynamics in policy-driven economies.