Working Paper: NBER ID: w12525
Authors: Alexander Dyck; Natalya Volchkova; Luigi Zingales
Abstract: We study the effect of media coverage on corporate governance by focusing on Russia in the period 1999-2002. This setting offers us three ideal conditions for such a study: plenty of corporate governance violations, no alternative mechanisms to address them, and the presence of an investment fund (the Hermitage) that actively lobbies the international press to shame companies perpetrating those violations. We find that Hermitage’s lobbying is effective in increasing the coverage of corporate governance violations in the Anglo-American press. We also find that coverage in the Anglo-American press increases the probability that a corporate governance violation is reversed. This effect is present even when we instrument coverage with an exogenous determinant, i.e. the Hermitage’s portfolio composition at the beginning of the period. The Hermitage’s strategy seems to work in part by impacting Russian companies’ reputation abroad and in part by forcing regulators into action.
Keywords: Corporate Governance; Media Coverage; Hedge Funds; Russia
JEL Codes: G3; O16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Hermitage Fund's lobbying (D72) | media coverage of corporate governance violations (G38) |
| media coverage of corporate governance violations (G38) | probability of violations being reversed (K16) |
| media coverage of corporate governance violations (G38) | intervention by regulators or companies (G18) |
| foreign press coverage (F30) | probability of governance violations being addressed (G38) |