Word Power: The Impact of Negative Media Coverage on Disciplining Corporate Pollution by Prof. P.V. Viswanath
Abstract:Sequences of individual words make up media reports. And sequences of media reports constitute the power of the news media to influence corporate practices. In this paper, we focus on the micro-foundations of news reports to elaborate how an atmosphere of negative news reports following an initial exposure of corporate pollution activity can help stop such activity through their impact on corporate managers. We extend our understanding of the corporate governance effect of news media byconsidering two new aspects of reports � one, the proportion of words in negative reports relative to the total number of words in all reports; and two, the geographical origin of news media. We suggest that the more negative the media coverage, and the more local this coverage, the greater the impact on corporations. Our study of news media reports from more than 600 newspaper sources o n disciplining pollution activities of listed Chinese firms from 2004 to 2012 provides strong support for our hypotheses. These findings have valuable implications for the handling of pollution issues in transitional economies via the power of news words. About the Speaker:P.V. Viswanath is Professor of Finance and Graduate Program Chair in the Department of Finance and Economics in the Lubin School of Business. He received his B.Com. in economics and statistics from the University of Bombay, his M.B.A in management science from the University of Kentucky, an M.B.A. in economics and management science and a PhD in finance from the University of Chicago.He is particularly interested in financial market development in emerging countries; his recent paper, 'Export Intensity and Financial Leverage of Indian Firms,' appeared in the International Journal of Trade and Global Markets in 2011. His research spans the more traditional areas of corporate finance, investments, insurance, and Law and Economics; his most recent publication is on 'Size Effects in the Pricing of Corporate Bonds,' which appeared in Financial Markets, Institutions and Instruments in 2013.