News media coverage and corporate leverage adjustments

Tung Lam Dang; Viet Anh Dang; Fariborz Moshirian; Lily Nguyen; Bohui Zhang

doi:10.1016/j.jbankfin.2019.105666

News media coverage and corporate leverage adjustments

Tung Lam Dang, Viet Anh Dang, Fariborz Moshirian, Lily Nguyen, Bohui Zhang

Research output: Contribution to journal › Article › peer-review

45 Citations (Scopus)

Abstract

We examine the impact of the media on firms’ leverage adjustments. Using a comprehensive sample of global news across 33 countries, we find that greater news coverage and more positive news sentiment are associated with greater leverage adjustment speeds. This finding is consistent with the argument that media coverage and content help lower the cost of firms’ adjustment toward target leverage. We further find evidence supporting two mechanisms through which the news media affects leverage adjustments: information dissemination and monitoring. Overall, our results are consistent with the dynamic trade-off theory of capital structure.

Original language	English
Article number	105666
Number of pages	22
Journal	Journal of Banking and Finance
Volume	109
DOIs	https://doi.org/10.1016/j.jbankfin.2019.105666
Publication status	Published - Dec 2019
Externally published	Yes

Keywords

Media coverage
Capital structure
Speed of leverage adjustment
Trade-off theory

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10.1016/j.jbankfin.2019.105666

Cite this

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title = "News media coverage and corporate leverage adjustments",

abstract = "We examine the impact of the media on firms{\textquoteright} leverage adjustments. Using a comprehensive sample of global news across 33 countries, we find that greater news coverage and more positive news sentiment are associated with greater leverage adjustment speeds. This finding is consistent with the argument that media coverage and content help lower the cost of firms{\textquoteright} adjustment toward target leverage. We further find evidence supporting two mechanisms through which the news media affects leverage adjustments: information dissemination and monitoring. Overall, our results are consistent with the dynamic trade-off theory of capital structure.",

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AU - Moshirian, Fariborz

AU - Nguyen, Lily

AU - Zhang, Bohui

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AB - We examine the impact of the media on firms’ leverage adjustments. Using a comprehensive sample of global news across 33 countries, we find that greater news coverage and more positive news sentiment are associated with greater leverage adjustment speeds. This finding is consistent with the argument that media coverage and content help lower the cost of firms’ adjustment toward target leverage. We further find evidence supporting two mechanisms through which the news media affects leverage adjustments: information dissemination and monitoring. Overall, our results are consistent with the dynamic trade-off theory of capital structure.

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KW - Capital structure

KW - Speed of leverage adjustment

KW - Trade-off theory

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News media coverage and corporate leverage adjustments

Abstract

Keywords

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