Effects And Its’ Principles Of Negative Media Reports On Minority Investors’ Protection

With the development of China’s capital market, the protection of minority investors has increasingly become a hot topic in academic field. Researchers has been done to extensively explore on the construction of minority investors protection systems from various perspectives, such as corporation internal governance, legal protection, market regulation, intermediary organization intervention, and so on. However, it is regrettable that all the aboved minority investors’ protection mechanisms have some limitations. In the meantime, since the 20 th century, typical cases about minority investors’ rights being protected because of media negative reports on listed companies had emerged on foreign and domestic capital markets, thus people cannot help turning sight to the media. Taking this opportunity, a lot of studies about media reports and capital assets pricing or media reports and corporate governance appeared in academic fields. However, there is still no consistent opinion in these studies about whether media reports should have any supervisory or constraint role, and the mechanism about media effects, which provides the expansion space for this research.On the basis of the systematically reviewing of related theories and literatures about investor protection and media governance, in-depth analyzing Chinese institutional background, this paper focuses on the following two questions:(1) What actual effects of media negative reports on minority investors protection.(2) How do media negative reports act on minority investors protection.As to the first question, this thesis takes an integrated index as proxy variable of the overall level of minority investors protection, manually collects the relevant data of media negative reports about Shanghai and Shenzhen A-share listed companies from 2000 to 2013, and uses content analysis method to judge the media news tone one by one, then makes theoretical analysis and empirical tests about the ex-ante supervisory and ex-post constrained effects of the negative media reports on minority investor protection.As to the second question, based on principal agent theory, institutional logic theory and communication’s agenda-setting theory, this paper analyzes and empirically studies this question from two aspects: firstly, from the internal point of view, this thesis discusses the mechanism of the negative media reports’ influence on board governance and large shareholders’ self-regulated activities, thus to promote minority investors’ protection degree. Next, from the external point of view, this thesis explores the mechanism of the negative media reports’ influence on the administrative regulatory agencies, stock exchange and auditors’ opinion, thus to improve minority investors’ protection degree.The main conclusions of this paper are as follows:Firstly, as to media’s effect on minority investors’ protection, the antecedent supervisory role and subsequent constraint role are both validated. Specifically, the lower minority investors’ protection level of corporation receives more negative media reports or the higher proportion of negative media reports. Media’s negative reports about listed companies have effectively promoted the minority investors’ protection level.Secondly, from the internal point of company, negative media reports result in board of directors making partially corresponding adjustments, such as downsizing of the board, an abnormal level of CEO turnover, a decline of directors’ compensation, thus proving the existence of causal chain of improving the level of minority investors’ protection. However,although the board independence and the board diligence have been improved somewhat, the following governance effect for the minority investors’ protection didn’t receive empirical supports. Meanwhile, there is not any governance effect in constraining large shareholders’ tunneling or promoting their propping behavior.Thirdly, from the external point of company, negative media reports may force administrative regulatory agencies and stock exchange’s positive intervention and the improvement of law enforcement efficiency. Regulatory intervention has powerfully promoted the minority investors’ protection level, but the consolidation of enforcement efficiency hasn’t attained its expected effect on improving the level of the minority investors’ protection. Next, negative media reports will have an effect on auditors’ opinion as well, and then increase minority investors’ protection level.Fourthly, the effect and its’ principles that the negative media reports on the minority investors’ protection will vary from the ownership of the enterprise on some degree. The media’s supervisiory and constraint effects on private enterprises are much more significant than on state-owned enterprises, but it is not obvious on central state-owned enterprises, and the constraint effect is very limited on local state-owned enterprises. From the internal and external point of the company, effects and its’ principles of negative media reports’ on the minority investors’ protection are also influenced by ownership.The probable innovations of this thesis are as follows:Firstly, this article breaks a paradigm that the existing researches discussed the question of the minority investor protection from the angle of the corporate’s internal governance, or law and finance theory, and looks for a new minority investors’ protection mechanism outside the law, from the “media’s supervision and constraint” perspective, which makes the relationship between negative media reports and the minority investors’ protection into a unified analytical framework to do research by synthetically combining a lot of analytical perspectives, such as management, economics, communication, law and sociology. Based on depth analysis of institutional background of media industry development and minority investors’ protection, this thesis systematically interprets the effects and action mechanism that negative media reports on the minority investors’ protection. The paper provides a new research point-cut to solve the question of minority investors’ protection.Secondly, this research not only realizes a large sample empirical test of media effect by collecting the data which span a longer period, but also processes the relevant media data manually and expands quantized information for qualitative information by using communication quantification analytical method, namely content analysis, thus structures a database about media reports’ tone of listed companies, which not only ensures the reliability of research results, but also makes a useful supplementary contribution to the existing research.Thirdly, this research attempts to structure a research analytical framework that the negative media reports’ effects on minority investors’ protection, and forms a more complete causal analysis chain aimed at the issue of media effect; the paper implements more in-depth investigate of the possible influence from the ownership’s heterogeneity; the thesis’ s research conclusions contribute to explaining the deeper causes of the disagreement of existing researches. Meanwhile, it provides some constructive opinions and suggestions for relevant agencies to treat the media governance’s effect objectively and rationally.