Abstract
ABSTRACT This paper studies the effect of media tone on firm-specific price crash risk. Media tone measures the imbalance between positive and negative coverage. Using data from China, we find firms with more favorable media tone have higher crash risk. The transmission channel is through weakened media governance and the subsequent motivated managerial opportunism. Moreover, the effect is more prominent for firms having more advertising expenditures, institutional holdings, and analyst coverage. We also find only the tone of state-controlled media significantly affects crash risk. Our study suggests the existence of media bias and its economic consequence.
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