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Abstract

This paper investigates whether newspapers report more favorably about advertising corporate clients than about other firms. Our identification strategy based on high-dimensional fixed effects and high frequency advertising data shows that advertising leads to more positive press coverage. This advertising bias in reporting is found among local and national newspapers. Further results show that advertising bias manifests particularly in less negative reporting after bad news events such as negative earnings surprises or extremely negative stock returns. Our findings cast doubt on the independence of the press from corporate pressure and hint at important information frictions.

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... This growing branch of the literature focuses on the ways in which firms can use advertising for purposes beyond direct effects on sales. Reuter and Zitzewitz (2006) and Focke, Niessen-Ruenzi, and Ruenzi (2016) show that firms can use advertising to influence media reports, whereas Cohen and Gurun (2018) find evidence that firms systematically increase local advertising in areas where they are facing jury trials. In a financial context, it has been argued that firms can use advertising strategically around insider sales (Lou 2014), IPOs and SEOs (Chemmanur and Yan 2009), as well as M&A transactions (Fich, Starks, and Tran 2016;Hillert, Kunzmann, and Ruenzi 2017). ...
... Our advertising data set comes from Kantar Media and is similar to the data used in Focke, Niessen-Ruenzi, and Ruenzi (2016). The data set starts in 1995 and ends in 2012. ...
... However, one endogeneity concern remains: it is possible that firms strategically advertise more around corporate news events that are known to them some time in advance and which they expect to trigger attention. Furthermore, Focke, Niessen-Ruenzi, and Ruenzi (2016) show that firms that advertise more are covered by newspapers more frequently. Thus, our results could be driven by increased news coverage that eventually causes attention (and is positively correlated with advertising) rather than by advertising directly. ...
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Using daily advertising data, we analyze the short-term effects of advertising on investor attention and on financial market outcomes. Based on various investor attention proxies, we show that advertising positively affects attention. However, it has only little impact on turnover and liquidity. Most importantly, short-term stock returns are not significantly influenced by advertising. Further results suggest that previous findings of an economically significant positive relation between advertising and returns are due to reverse causality. Thus, the belief that stock prices can be temporarily inflated via advertising is misguided.
... zeigen hingegen, dass Lokalzeitungen vorteilhafter über lokale Unternehmen berichten als über solche, die nicht aus der Region stammen.Besonders hervorzuheben ist in diesem Zusammenhang die Arbeit vonFocke, Niessen-Ruenzi & Ruenzi (2015). Es handelt sich dabei zwar noch um ein Working Paper, allerdings ist damit zu rechnen, dass der Artikel in einem hochrangigen Journal veröffentlicht werden wird. ...
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Das Thema der verzerrten Medienberichterstattung wird in der ökonomischen Literatur meist unter dem Begriff „Media Bias“ zusammengefasst. Der Beitrag gibt einen Überblick zum Stand der Forschung über Definitionen, Formen, Ursachen, Ansätze zur Messung sowie Folgen von Media Bias. Der Fokus liegt dabei auf hochrangigen internationalen wissenschaftli­chen Fachzeitschriften im Bereich der Ökonomik, die in der letzten Dekade eine Vielzahl an Studien unmittelbar zu diesem Thema veröffentlicht haben (u. a. American Economic Review, Quarterly Journal of Economics). Über den Bericht des aktuellen Forschungsstands hinaus identifiziert der Beitrag thematische Schwerpunkte und zentrale Herausforderungen der bishe­rigen Forschung und benennt Felder für zukünftige Forschung.
... Several empirical studies have found correlations between advertising purchases and corresponding positive press coverage. After analyzing 155 US newspapers, including the major national publications, Ruenzi et al. (2014) found that a significantly higher proportion of positive words was used in articles written about firms that advertise in that publication as compared with non-advertising firms, while the opposite was found for negative words. Similarly, De Smet and Vanormelingen (2010), whose study focused on advertisers in Dutch-language Belgian newspapers, found that increased advertising expenditure was significantly correlated with a greater number of positive articles published about the firm; furthermore, termination of advertising was followed by a notable drop in coverage of the advertiser. ...
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