DP15260 Media Capture by Banks

Author(s): Ruben Durante, Andrea Fabiani, José Luis Peydró
Publication Date: September 2020
Keyword(s): banks, Earnings reports, Eurobond crisis, media bias, newspapers
JEL(s): G21, L82
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15260

Do banks exploit lending relationships with media companies to promote favorable news coverage? To test this hypothesis we map the connections between banks and the top newspapers in several European countries and study how they affect news coverage of two important financial issues. First we look at bank earnings announcements and find that newspapers are significantly more likely to cover announcements by their lenders, relative to other banks, when they report profits than when they report losses. Such pro-lender bias applies to both general-interest and financial newspapers, and is stronger for newspapers and banks that are more financially vulnerable. Second, we look at a broader public interest issue: the Eurozone Sovereign Debt Crisis. We find that newspapers connected to banks more exposed to stressed sovereign bonds are more likely to promote a narrative of the crisis favorable to banks and to oppose debt-restructuring measures detrimental to creditors.