A friendly turn - Advertising bias in the news media

Ruenzi, Stefan ; Niessen-Ruenzi, Alexandra ; Focke, Florens

Document Type: Conference presentation
Year of publication: 2017
Conference title: 2nd Economics of Media Bias Workshop
Location of the conference venue: Lausanne, Switzerland
Date of the conference: 16.-17.02.2017
Publication language: English
Institution: Business School > ABWL u. Corporate Governance (Niessen-Ruenzi 2012-)
Business School > Internat. Finanzierung (Ruenzi 2009-)
Subject: 330 Economics
Abstract: This paper investigates whether newspapers report more favorably about advertising corporate clients than about other firms. Our identification strategy based on high-dimensional fixed effects and high frequency advertising data shows that advertising leads to more positive press coverage. This advertising bias in reporting is found among local and national newspapers. Further results show that advertising bias manifests particularly in less negative reporting after bad news events such as negative earnings surprises or extremely negative stock returns. Our findings cast doubt on the independence of the press from corporate pressure and hint at important information frictions.

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