DP9192 Media slant against foreign owners: Downsizing

Author(s): Guido Friebel, Matthias Heinz
Publication Date: October 2012
Keyword(s): economic xenophobia, foreign direct investment, globalization, media economics, multi-national enterprises
JEL(s): L10, L33, L82
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=9192

We establish the existence of strong media slant against foreign owners. Using a unique data set from nation-wide distributed quality newspapers in Germany, we find that a foreign firm that downsizes in Germany receives almost twice as much attention than a domestic firm. This quantitative slant is accompanied by qualitative slant; newspapers report in a more negative way about downsizing foreign than domestic firms. The slant is present in all quality newspapers, but it increases from right to left in the political spectrum. This is consistent with theory papers arguing that slant is an equilibrium phenomenon. The slant we document is a clean measure for economic xenophobia; however, not geared against migrants, but against foreign owners. The slant can be a substantial obstacle to FDI, as illustrated by case studies. Our results are likely to be a lower bound estimate, because Germans are rather globalization-friendly and we are looking at quality papers, not tabloids.