Negative media coverage, law environment and tunneling of controlling shareholder

Abstract

Purpose – The purpose of this paper is to analyze the relationship among negative media coverage, law environment and tunneling of controlling shareholders. Design/methodology/approach – Under the Chinese especial institutional background, this paper empirically test the relationship among negative media coverage, law environment and tunneling of controlling shareholders with the sample of 2009-2011 Chinese listed companies. Findings – The empirical results demonstrate that negative media coverage can reduce tunneling of controlling shareholder, and compared with state-owned listed companies, negative media coverage have a greater effect on tunneling in non-state-owned listed companies; and negative media coverage have a greater effect on tunneling in areas with better law environment. Further study shows that the reduction of controlling shareholder’s behavior of tunneling can improve company performance, and the improvement is more significant in non-state-owned listed companies and areas with better law environment. The research results indicate that media coverage play a very active role on restraining stakeholder’s behavior and perfecting corporate governing. Originality/value – First, this paper will study of tunneling from the perspective of media coverage for the first time. Second, this paper further analyzes how the decrease of tunneling improves corporate performance following the research of how media coverage influence tunneling. Third, this study enrich literatures about the effects of media coverage on corporate governance in Chinese capital market.