HEC Research Papers Series,
HEC Paris

Abstract: Media dissemination plays an important role in facilitating price discovery. Political pressure that restricts media dissemination can hinder this function and affect investors’ perceptions. This paper studies the magnitude of newspaper censorship in China and its economic consequences using a setting of “tunneling” scandals. We find significant evidence of censorship of tunneling-related negative news at the national and local level. We further show that news that survives censorship reduces information asymmetry and improves pricing efficiency. We find that censorship blocks informative tunneling news and delays incorporation of tunneling reporting into prices.

Keywords: Censorship; Media Dissemination; Newspapers; China; Local Protection; Information Environment; Tunneling; Financial Disclosure

JEL-codes: G15; G18; G30; G32; M10; M40; M41; M48

63 pages, September 18, 2020

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