Study On The Role Of Media In The Corporate Governance

With the establish of modern enterprise system, stock company become the main part of social economy, so how to strength the corporate governance of stock company has been given more and more attention. The traditional corporate governance is mainly base on the principal agency frame, through setting up a series of system to alleviate the agency problem caused by the separation of ownership and management. But more and more research suggests that company shares are highly centralized or relatively centralized in most countries. In this case, the large shareholders will tend to pursuit their own personal interests and damage the interests of other shareholders, so the second agency problem occurs between the large shareholders and small shareholders. A good corporate governance mechanism should be able to reduce the agency costs which were caused by the two types of agency problem. The traditional research on corporate governance were most focus on internal governance mechanisms such us the board of directors, management incentive. But recently studies shows that external governance mechanisms also can work in reduce agency cost and improve corporate governance effectively. As one of these external governance mechanisms, media has attracted more and more attention.As the "fourth rights" independent from the legislative, judicial and administrative, the media is considered to be an important arrangement in corporate governance. The media act an intermediary role in information collection and dissemination. media report on one hand can effectively reduce the information asymmetry between investors and companies, on the other hand, the media report can generate a kind of powerful outside force and bring the external attention, further to restrict the management and large shareholders to implement all kinds of opportunistic behavior, improve management efficiency. Media as an important external governance mechanism play a significant role in corporate governance, so how media works in reduce agency cost and improve corporate governance, what factors limit the role of the media in corporate governance. All these are the research focus of this paper.The paper is total divided into six major parts. The first part is a general overview of the full text of the research background, the significance of research, research methods and contributions. The second part is the literature review. According reviews relate research on media and corporate governance at home and abroad, find the evidence the media can works in corporate governance. At last summarize literature about the media and agency cost. The third part is theoretical analysis. Through reputation theory, information asymmetric theory and agency cost theory analysis how media work in corporate governance, and analysis the factors impact the media work in corporate governance. What’s more have found the path how media work in corporate governance. The fourth part is assumptions and research design. This part deducts assumptions between media reports and agency cost, and completes the sample selection, data sources, variable definition and model construction. The fifth part is empirical part, including descriptive statistics, regression analysis and stability test, fully present the research result. The sixth part is conclusion, including research finding, suggestions and countermeasures and future research directions.To study the role of media in corporate governance, the research ideas and methods is as follow. First, by theoretical deduction find media can work through relieve the information asymmetry and the reputation mechanism to reduce agency cost and improve corporate governance, and analysis factors which restrict the media work in corporate governance. Further more find the path how the media work in corporate governance. The second, test above deduct with empirical research. The research methods mainly contain normative research and empirical research. In the first to third part adopt the normative research. Combine with reputation theory, agency information asymmetric and theory cost theory deduct how media work in corporate governance. And the forth to fifth part mainly adopt empirical research. In these parts, get media reports data from CNKI and other variable from CSMAR and CCER, and regress with2SLS. When regress control the media background, property attribute, level of media environment to have a fully understand about the role of media in corporate governance. By selecting the2008-2012China A shares list companies, this study try to find the evidence that media reports can reduce agency cost by empirical research. The study conclusions are as follow. First, media as one kind of external governance mechanisms can effective reduce agency cost and improve corporate governance by media reports, it indicates that media can play a role in corporate governance by alleviate the information asymmetry and formation an external reputation incentive mechanism. Second, the negative reports can not work in corporate governance effectively. We can deduct that reputation punishment mechanism can not work in China. Reputation mechanism can only work through reputation’s positive incentive effect. Third, the media ownership, reported object properties and media environment can affect the media work in corporate governance. The state-owned media can be more effective in corporate governance and the media reports can be more effective on non state-owned enterprises. What’s more, a high level of media environment can be more contribute to media plays a role in corporate governance for that high level of media environment can make information circulate more smooth and can help alleviate the information asymmetry.The study’s contributions are as follow. The first, the study have a comprehensive understand on media reports’ role in reduce agency cost and improve corporate governance. Media as a kind of external governance mechanism can work in corporate governance. The research about media and agency cost is in the initial stage, this study can supplement relate literature. The second, through the special perspective of agency cost, included agency cost between separation of ownership and management and major shareholders and small shareholders, have a fully understand on media’s role in corporate governance. Furthermore this study had distinguished the nature of media reports to identify whether different natures of media reports have different function. The third, the study try to find the path which the media work in corporate governance. Theoretically, media can work in corporate governance by alleviate the information asymmetry and the reputation mechanism, but the research’s finding shows the reputation mechanism has be limited to a certain extent in China, reputation punishment mechanism can not effective work in our country. The study shows the evidences to effective develop to the role of the media in corporate governance in the future by fully research on the path of media work in corporate governance.The limitations of this paper are:firstly, only eight newspapers are selected as the media reports data source of our research, this may limit the integrity of the media data, also can influence conservatism of our study.In the information age, people can access to information has not only from newspapers, the development of the Internet has greatly expanded the information channel, and also it can influence on corporate governance. But it is hard to obtain these media data and difficult to identify their authenticity and authority. So the study use newspaper as the data source and also it may influence the result. Secondly, a subjective judgment standard is used to measure the nature of media reports. Though the study control the subjective influence in the process of data collection, but it is inevitable that negative reports data collected by hand may partly influence the research conclusions. Since there is no database to get the negative reports data so the study has to confirm the nature of media report by manual reading in order to research the nature of media report’s influential in corporate governance.