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Media coverage and foreign share discount puzzle in China

Cumming, D.; Dixon, R.; Hou, W.; Lee, E.

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D. Cumming

W. Hou

E. Lee


There is growing evidence in the finance literature that media coverage can influence security pricing by facilitating news dissemination and reducing informational frictions even if it does not provide new information. This study examines the role of media coverage in the well-known foreign share discount puzzle in China. We show that differential level of news coverage for the same firm by Chinese and English media is significantly associated with the foreign share discount. Specifically, the discount is greater among firms with relatively more Chinese than English press coverage. We also find this effect more pronounced among firms with less analyst following and less institutional ownership. This implies that media coverage compensates for limitations in analyst coverage and is more influential among less sophisticated investors. Our evidence is robust to controls of other determinants of Chinese foreign share discount documented by previous literature. Despite the widespread belief that the Chinese media is tightly controlled, our study reveals that it still plays an influential role in the capital market.


Cumming, D., Dixon, R., Hou, W., & Lee, E. (2013). Media coverage and foreign share discount puzzle in China. European Journal of Finance, 22(4-6), 393-412.

Journal Article Type Article
Acceptance Date Dec 20, 2012
Online Publication Date Feb 28, 2013
Publication Date Feb 28, 2013
Deposit Date Feb 12, 2013
Publicly Available Date Jul 31, 2019
Journal European Journal of Finance
Print ISSN 1351-847X
Electronic ISSN 1466-4364
Publisher Taylor and Francis Group
Peer Reviewed Peer Reviewed
Volume 22
Issue 4-6
Pages 393-412
Keywords Media coverage, Foreign share discount, China, G14, L82.
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