Management Accounting Section Midyear Meeting

Media Coverage and Corporate Labor Investment Decisions

• In Event: Control Systems IV

Abstract

We propose that for corporate investment decisions that attract significant media attention (i.e., labor), media coverage can act as a friction that hampers efficient investment. We develop a new measure of media coverage by weighting the circulation of individual media outlets by the geographical distance between headquarters of the media outlet and firm. We find that media coverage leads to greater abnormal net hiring, measured as the absolute deviation from optimal net hiring predicted by economic fundamentals. Our findings suggest that the media can serve as a friction in, rather than a facilitator or monitor of, firms’ capital allocation decisions.

Authors

• Vishal Baloria, Boston College

• Alvis K. Lo, Boston College

• Susan Shu, Boston College