The power of the business media: Evidence from firm‐level productivity

Abstract

We examine the impact of media coverage on firm‐level productivity and find that firms with higher media coverage are associated with higher productivity. Using the launch of Barron's Online as a quasi‐shock to media coverage, we document that this relationship is causal. Further exploration shows that the positive media–productivity relationship is stronger for firms with weaker governance mechanisms and for those with higher levels of information asymmetry. We also identify an increase in reputational and career concerns and a reduction in managerial shirking as channels through which media coverage affects firm‐level productivity. The results are robust to alternative explanations and endogeneity concerns. Overall, our findings suggest that media coverage reduces managerial opportunism, and thus enhances resource deployment decisions.