Star power and box office revenues: evidence from China

Abstract

Using data over the 2009–2016 period, this paper examines the impact of star power on box office revenues in China. Unlike most existing studies, we measure star power as a continuous variable based on the number of registered fans of movie stars on the most popular microblogging website in China (Sina Weibo). We also examine the impact of star power on box office revenues through three important channels (industry recognition, internet media evaluation, and internet media buzz). Estimation of log-linear specifications shows that directors play an important role in the financial success of movies in China. The direct effect of star power on the financial success of movies is negative, and the same applies to the direct effect of internet media evaluation. The indirect quality effect of star power through industry recognition is positive but insignificant. The marginal effect of industry recognition becomes significantly positive only when the level of star power reaches the second quartile of its distribution. The indirect signal effect of star power through internet media evaluation is negative and statistically significant. However, the indirect signal effect through internet media buzz is positive and significant at all levels of star power and this effect dominates the negative direct effect of star power once it reaches a threshold level. Endogeneity-corrected estimation results confirm that the total effect of star power on box office revenues in China is positive and significant. The Chinese movie industry, which appears to be dominated by low-quality movies, can benefit from further reforms.