Media Sentiment and Institutional Ownership

This paper examines whether institutional investors invest less into overvalued firms due to their informational advantage. Considering high media sentiment as a source of overvaluation, we show that institutional investors tend to hold fewer stocks of firms that receive high media sentiment. The size of the overvaluation is empirically shown as a channel through which media sentiment influences the ownership structure in firms. We conclude this paper by showing institutional investors do not view high media sentiment as a chance to withdraw their money from firms with poor corporate governance structure that the institutional investors cannot exert much influence on. Instead, institutional investors tend not to invest in these firms from the start.