Political Bias of Corporate News in China: Role of Commercialization and Conglomeration Reforms

Using textual analyses of 1.8 million articles, this paper examines whether the authoritarian government in China, despite its direct ownership and control of the press, manages to increase the diversity of corporate news through commercialization and conglomeration reforms. Through the creation of business newspapers, commercialization introduced market competition into the media market; conglomeration subsequently re-organized business and official newspapers from the same locale into a single news group. Our evidence shows that business newspaper articles are less politically biased than official newspaper articles, and this difference in the bias magnifies among conglomerated newspapers, with business newspapers showing a further reduction in political bias. Our results are robust to using a matched firm-month research design that examines the content of articles written about the same firm in the same month and a difference-in-difference approach to test for conglomeration effects. Corroborating evidence on the perceived informativeness of the news articles, as captured by absolute stock price response to article publication, follows a similar pattern. That is, the stock price response is stronger for business newspaper articles than official newspaper articles, and this difference is larger for conglomerated newspapers than non-conglomerated newspapers. The evidence suggests that commercialization can shift newspapers’ reporting incentives towards consumers’ preferences and attenuates state influence, even under state ownership and control. Also, conglomeration facilitates specialization and diversification, allowing business newspapers to focus on commercial objectives and official newspapers to concentrate on political goals. The combined evidence suggests the reforms allowed the government to successfully realign the newspaper industry to better fulfill its dual role as the government’s mouthpiece and an information institution supporting the market economy.