The media are an important player in the financial sector, their actions influence investors and produce different effects both on the markets and on the management of companies.
Both newspapers and television and new media are, in fact, able to convey relevant information thus making the markets more efficient. They are also able to act as watchdogs, making frauds or abuses public, and can catalyze the attention of investors on certain issues or companies according to their decisions.
It is therefore essential to understand what are the mechanisms that govern the media industry, with particular attention to the possible biases and distortions that the media themselves may have in choosing what and how it should be published. Much of the research on this subject has focused, so far, on the bias of the media in their talk about the facts of politics, identifying which factors make a newspaper or a television partisan and how to create the conditions for politically neutral information .
The problem of deployed media seems to be less important in talking about economics and finance.
In this field, in fact, there is no a priori preference and there is unanimity in agreeing that the aim to be sought is the maximization of value, for companies, for shareholders, for investors in general. However, if present, the factors of media bias in the financial sphere could be just as – if not more – dangerous than in the political sphere.
What then are the factors that drive the media not to be objective in reporting or changing the way financial news is written? One of the factors that may be most important is the presence of a conflict of interest between those who publish the news and who, of the news, is the protagonist. In a recent article Emanuele Bajo, Marco Bigelli and Carlo Raimondo – “Ownership Ties, Conflict of Interest, and the Tone of News” – analyzed what happens when newspapers find themselves having to talk about companies with which the newspapers themselves have a connection Property.
Studying a sample of about 130,000 articles published from 2007 to 2011 in the main Italian daily newspapers, the researchers found that companies connected with newspapers get privileged treatment compared to companies not connected with newspapers.
Specifically, the articles regarding companies in conflict of interest are greater in quantity, both in terms of the number of articles and their size, and are better in terms of quality, containing more positive words and fewer negative words.
The effect is all the greater the more pronounced is the conflict of interest, measured as the size of the property bond between the company subject of the articles and the publisher of the newspaper that publishes the articles themselves.
The research suggests that particular attention should be paid when we are faced with news that may suffer from a conflict of interest, as it could happen that they are more benevolent than necessary.
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Author: Carlo Raimondo
Università della Svizzera Italiana