Broadcast Media and Asset Prices: The Effect of an Anti-Corruption Message in China

Does entertainment broadcast media affect equity stock prices? We exploit an exogenous event to identify such media effects, namely, the broadcasting in China of the highly popular TV drama ‘In the Name of People’ on March 28th, 2017. The TV show contained a robust State-approved anti-corruption message and is expected to alter investor perceptions. We find that stock prices fall in reaction to the broadcast. Importantly, the negative effect on asset prices is higher in magnitude for firms with political connections. Also, privately-owned politically connected firms exhibit more substantial adverse price effects compared to state-owned firms. The reduction in investors’ valuation of politically connected firms persists over the long run. Our empirical findings support the notion that traditional mass-media (i.e., TV) modifies the information set of investors and has significant educational value. In our case, an anti-corruption TV drama raises investors’ awareness of the potentially high costs of a firm’s political connections when the State is actively pursuing an anti-corruption strategy.