Don’t Believe the Hype: Local Media Slant, Local Advertising, and Firm Value

April 4, 2014 Leave a comment

THE JOURNAL OF FINANCE • VOL. LXVII, NO. 2 • APRIL 2012

Don’t Believe the Hype: Local Media Slant, Local Advertising, and Firm Value

UMIT G. GURUN and ALEXANDER W. BUTLER∗

ABSTRACT

When local media report news about local companies, they use fewer negative words

compared to the same media reporting about nonlocal companies. We document that

one reason for this positive slant is the firms’ local media advertising expenditures.

Abnormal positive local media slant strongly relates to firm equity values. The effect

is stronger for small firms; firms held predominantly by individual investors; and

firms with illiquid or highly volatile stock, low analyst following, or high dispersion of

analyst forecasts. These findings show that news content varies systematically with

the characteristics and conflicts of interest of the source.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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