Do Institutional Investors Affect News Coverage? The Role of Media Ownership

We study the effects of institutional investors’ ownership in media firms on news coverage. We find that a media outlet issues more positive c coverage of a firm when they have common institutional investors. Our results are stronger for firms overweighted by the common investors and primarily driven by actively-managed funds. We establish causality by relying on 1) fixed effects that control for all time-varying firm fundamentals and potential matching between firms and media outlets, and 2) the quasi-natural experiment of financial institution mergers. We also find that media ownership is associated with greater fund flows but not better performance.

Institutional investor media ownership news coverage fund flow