Media Coverage and the Cost of Debt
Research output: Journal Publications and Reviews (RGC: 21, 22, 62) › 21_Publication in refereed journal
Related Research Unit(s)
|Journal / Publication||Journal of Financial and Quantitative Analysis|
|Online published||8 Jan 2019|
|Publication status||Published - Mar 2020|
|Link to Scopus||https://www.scopus.com/record/display.uri?eid=2-s2.0-85059703195&origin=recordpage|
This paper investigates the relation between media coverage and offering yield spreads using a comprehensive dataset of 5,338 industrial bonds issued from 1990 to 2011. We find that media coverage is negatively associated with firms’ cost of debt. This association is robust to controlling for standard yield determinants, different model specifications, and endogeneity. We identify 4 economic channels through which media coverage influences the cost of debt: Information asymmetry, governance, liquidity, and default risk. Importantly, media coverage has an independent influence beyond the effects of these economic mechanisms and is not a proxy for other firm attributes.