Media Governance and Firm Valuation: An Examination of Media Shaming on Corporate Financial Fraud

Media plays an increasingly important role in corporate governance. We study the effect of media governance on firm valuation by focusing on media reporting of corporate financial frauds in China during the period of 2000 to 2012. We find that media shaming has differential impacts on firm valuation, with reintegrative shaming having positive effect on firm value while disintegrative shaming resulting in negative valuation on the fraud firm, and such effects are amplified by media salience. In addition, we find that prior stakeholders’ sentiment positively moderates the positive effects of reintegrative shaming and the negative effects of disintegrative shaming on the fraud firm value. These findings deepen our knowledge of media shaming by highlighting how media polices firms by eliciting different sentiments in stakeholders.