How firms respond to external valuation: Evidence from the monitoring role of media

Abstract

AbstractThis study explores how media evaluations affect corporate capital investments. I show that media evaluations of firms affect corporate capital investments via the reputation mechanism, that is, a more negative media evaluation of the firm will motivate managers to give up inefficient investments. Meanwhile, a higher quantity of news underlying news evaluation and good firm performance strengthen the positive effect of media evaluation on corporate investments, whereas a higher level of divergence of news evaluation weakens the positive effect of media evaluation on corporate investments.