News media coverage and corporate leverage adjustments

Tung Dang, Viet Dang, Fariborz Moshirian, Lily Nguyen and Bohui Zhang

Journal of Banking & Finance, 2019, vol. 109, issue C

Abstract: We examine the impact of the media on firms’ leverage adjustments. Using a comprehensive sample of global news across 33 countries, we find that greater news coverage and more positive news sentiment are associated with greater leverage adjustment speeds. This finding is consistent with the argument that media coverage and content help lower the cost of firms’ adjustment toward target leverage. We further find evidence supporting two mechanisms through which the news media affects leverage adjustments: information dissemination and monitoring. Overall, our results are consistent with the dynamic trade-off theory of capital structure.

Keywords: Media coverage; Capital structure; Speed of leverage adjustment; Trade-off theory (search for similar items in EconPapers)
JEL-codes: G12 G15 G30 G32 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:109:y:2019:i:c:s0378426619302419

DOI: 10.1016/j.jbankfin.2019.105666

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