حاکمیت شرکتی جایگزین: پوشش رسانه های داخلی از ادغام و خرید در چین Alternative corporate governance: Domestic media coverage of mergers and acquisitions in China

1. Introduction Can domestic media sources inform investors and supplement corporate governance in developing countries despite censorship and bias? We examine the role that domestic newspapers play in the governance of mergers and acquisitions in China. The existence of a market for bias in the news (Gentzkow and Shapiro, 2006; Gentzkow and Shapiro, 2008) has been widely documented even in the absence of political pressure (see, e.g., Groseclose and Milyo, 2005; Mullainathan and Shleifer, 2005). The content of media coverage is a valuable commodity which has a widely documented ability to shape perceptions and outcomes of a wide range of significant areas such as political elections (Stromberg, 2004; Gentzkow, 2006; Della Vigna and Kaplan, 2007; Gentzkow et al., 2012), education (Gentzkow and Shapiro, 2004), and entertainment (Jensen, 1979; Jensen and Oster, 2009). This value, coupled with the strong government and business influence on the Chinese media requires coverage of the M&A market to meet two distinct demands: those of the government and the business elite for favorable coverage, and those of the market for accurate coverage. In the sphere of corporate governance, media coverage can influence managers and board members (Dyck and Zingales, 2004), expose corporate malfeasance (Miller, 2006; Bushee et al., 2010; Dyck, Morse and Zingales, 2010), and force management to take corrective actions (Dyck, Volchkova and Zingales, 2008; Joe et al., 2009; Liu and McConnell, 2013). It is unclear how well a biased media fulfills the monitoring role in corporate governance, especially in developing countries, due to these two potentially contradictory demands on its coverage. China combines an active capital market‟s demand for information with a well-documented political and corporate bias in the media (see, e.g., Winfield and Peng, 2005; Zhao, 2005; Lee et al., 2007) providing an informative setting to test the interaction of the two. We identify political and corporate factors that influence the tone of the domestic press coverage of M&A events in China, and test whether compromised coverage can still convey useful information and improve corporate governance. These findings can be abstracted to the broader picture of corporate governance through the media in the developing world. Corporate governance literature documents the lack of a well-established managerial labor market and an effective legal system for protection of minority shareholders in developing countries in general (Shleifer and Vishny, 1997; La Porta et al., 1998; 2000; Demirguc-Kunt and Maksimovic, 1998; Levine, 1999; Pistor et al., 2000) and in China in particular (Sun and Tong, 2003; Allen et al., 2005; Cull and Xu, 2005). Additionally, press coverage in developing countries is more likely to be subject to government censorship (Djankov et al., 2003; Besley and Prat, 2006). The ability of the domestic media to serve as an external governance mechanism, supplementing an ineffective domestic legal system in spite of censorship, is an important issue in corporate governance that merits further examination.