Firm-Level Media Coverage, Bank Loans, and the Role of Institutional Environments

Employing an international sample of 12,422 bank loan facilities across 37 countries spanning the period from 2000-2016, we find that both media coverage and positive media sentiment reduce the bank loan interest rate spread, which can be achieved through the media’s roles in mitigating information frictions, reducing information risks, and enhancing the competition among lenders. Moreover, we show that favourable aggregate media sentiment increases the participation probability of non-leader bank lenders and reduces the percentage share of the leading banks involving syndicated loan issuances to borrowers, which implies the information feedback effects of media sentiment in the syndicate loan structure. We further document that this negative relationship is more pronounced in countries with better financial information and governance environments, higher representation of privately owned media newspapers, and lower government control of banks. Our main conclusions remain valid after carefully considering endogeneity issues and conducting various robustness tests.