Media report favoritism and consequences: A comparison of traditional and new energy sector

This paper investigates whether media report favoritism affects firm crash risk both in the traditional and new energy sector. Crash risk is caused by a suddenly outflow of a large amount of cumulatively hidden bad news. Media report favoritism mitigates firm information asymmetry and impairs managements' ability to conceive bad news to outsiders. We find that media report favoritism, measured by total number of news covering firm, significantly reduces the energy firms' crash risk for both traditional news and online news. Our results are robust for Heckman selection model and alternative measures of independent variables. Further, we find that the relation between media coverage and crash risk is more pronounced for new energy firms, non-SOEs firms, firms with higher analyst following, and firms with larger board size. These results indicate that media coverage could play a role in mitigating information asymmetry and reduces firm crash risk. • The paper examines the link between media report favoritism and corporate crash risk. • Media coverage plays an important role in mitigating information asymmetry. • Media coverage has an important effect on curbing managements' ability to hide bad news. • Media coverage is increasingly effective in reducing crash risk among new energy firms and Non-SOEs firms.