The Corporate Governance Role of the Media: Evidence from Russia
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 Hermitageâ€™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. This effect is present even when we instrument coverage with an exogenous determinant, i.e. the Hermitageâ€™s portfolio composition at the beginning of the period. The Hermitageâ€™s strategy seems to work in part by impacting Russian companiesâ€™ reputation abroad and in part by forcing regulators into action.
Alexander Dyck thanks the Gamma Foundation, the Division of Research, Harvard Business School, and the Rotman School of Management for financial support. Luigi Zingales thanks the Gamma Foundation, the CRSP center, and the George Stigler Center at the University of Chicago for financial support. We thank Beatriz Armendariz, Stefano della Vigna. Andrei Shleifer, Andrei Simonov and participants and seminars at Dartmouth, Harvard, Stockholm School of Economics and the NBER for very useful comments. We thank Mehmet Beceren and Victor Xin for their research assistance. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Alexander Dyck & Natalya Volchkova & Luigi Zingales, 2008. "The Corporate Governance Role of the Media: Evidence from Russia," Journal of Finance, American Finance Association, vol. 63(3), pages 1093-1135, 06. citation courtesy of