Media Uncertainty and Risk-Taking

Abstract

This study investigates the association between media uncertainty and a comprehensive set of corporate decision-making measures that capture firm, investment, and financial risk. We report evidence that CEOs and firms who attract greater media uncertainty are more risk-seeking. Media uncertainty is positively associated with future stock return volatility, more risky investment and higher financial risk. However, media uncertainty is associated with lower capital expenditure and reduced free cash flow. Our findings are robust to endogeneity concerns and further tests, thereby supporting the role of media as an external mechanism for monitoring firm risk-taking activities.

Keywords: Media uncertainty; Firm risk; Investment and financial risk; Risk-seeking activities

JEL Classification: G31; G32; G34