Attention: The impact of media attention on market reaction to corporate violations

Abstract

Reducing market volatility and achieving high-quality development are important tasks for the Chinese capital market at the present stage. Based on the asset pricing role of media, this study used the event study to empirically examine the impact, as well as the heterogeneity from type and emotional tendency, of media attention on the market reaction to corporate violations from the perspective of limited attention. The results showed that the media’s prior attention to the listed company has a significantly negative impact on the market reaction after the company’s violation. The attention of network media and policy-oriented media has a significantly negative correlation with the market reaction after the company’s violation, while market-oriented media has no significant impact. Compared with neutral media attention, negative and positive media attention trigger more severe negative market reaction after company violations. Furthermore, the negative impact of media attention on the market reaction after corporate violations is mainly manifested in non-state-owned enterprises. The results demonstrate the important role of media attention in asset pricing and have important practical significance for better playing the role of the media, protecting the rights and interests of investors and achieving high-quality development of the capital market.