Media independence and firm performance: Evidence from emerging markets

Can media have any influence on firm performance? Do firms in countries with more independent media perform better than firms with less independent media? This paper seeks to answer these questions and aims to document the relationship between media independence and firm performance in emerging markets. Using a dataset from twenty four emerging markets, we show a significantly positive relationship between media independence and firm performance. We argue that independent media reduces information asymmetries for stock market participants. Consequently, it becomes hard for managers to expropriate, thereby improving performance of firms. We also show that the relationship between media independence and firm performance is more pronounced in firms that have higher agency problem. For instance, our results show stronger impact of media independence on firms with no dividend payouts, no analyst coverage, concentrated ownership, and higher level of operational complexity. It shows that media can play a substitute for traditional governance mechanisms in emerging markets.