Media Coverage, Ownership Nature and Debt Financing Costs of Listed Companies

Abstract

Based on the theories of reputation and asymmetric information, we use 5988 sample data of firms listed in Shenzhen and Shanghai stock exchanges in the period 2010-2014 and apply Heckman two-stage model to empirically test the impact mechanism of media coverage on debt financing costs of listed companies. We explore the impact of media coverage on the debt financing costs of the listed companies under different ownership nature. The results show that, media coverage has a significant impact on debt financing costs of listed companies, in which, positive media coverage reduces company’s debt financing costs while negative media coverage increases the company’s debt financing costs. Media coverage has a different impact on debt financing costs of listed firms with different nature of ownership. Specifically, with respect to state-owned enterprises, the impact of media coverage on easing debt financing costs is more apparent on non-state-owned enterprises. While with respect to non-state-owned enterprises, the impact of media coverage on increasing debt financing costs is more apparent on state-owned enterprises. Keywords: Media Coverage; Debt Financing Costs; Ownership Nature; Heckman Two-stage Model