Research shows that media coverage, even negative, helps businesses and the economy

Talking Biz News is running excerpts this week from “The Future of Business Journalism: Why it Matters for Wall Street and Main Street.” Here is the first one.

Professors and researchers across the academic spectrum study relationships and effects.

The bulk of the analysis of how business media impacts corporations and the economy has been done by those on the business side, not the media researchers. It’s hard to argue that the research has a bias toward arguing the positive effects of media when the data is coming from business researchers, not the mass communication researchers.

That research also shows that the business community historically has played a negative role in business news, putting pressure on publications to ignore stories that might place them in a negative light with society despite the article’s contribution to a better understanding of how that business works, according to Maha Rafi Atal of the University of Cambridge. Many companies and executives view the business journalism field as an enemy rather than as a way to help society understand their impact.

A report by the Freedom Forum Institute, written by Mike Haggerty and Wallace Rasmussen, concludes: “Executives perceive media people as liberal, adversarial, well-educated do-gooders—mal-informed and misinformed about business—who operate with little or no supervision. In their view, reporters come into interviews unprepared, ask arrogant and unfair questions, and see only one side of an issue, the side that is inevitably anti-business.”

Despite this adversarial perception in the business community, the importance of quality business journalism to consumers, to businesses, and to economies is well-established. Grant Hannis of the University of Massey in New Zealand writes that “economic activity is, after all, how a society creates and distributes wealth, and a vigorous business journalism sector helps ensure this occurs efficiently, by, for instance, transmitting information between economic agents and exposing corporate malfeasance.” This interaction manifests itself in different ways. Paul Tetlock discovered that Wall Street Journal content predicts movements in broad economic indicators such as stock market activity.

Corporate reputation researcher Craig Carroll found that mentions of corporations in the news media had a stronger effect on their public perception than advertising spending or press releases. He writes: “There was a direct correspondence between the amount of media coverage devoted to executive performance and workplace environment and the use of these attributes by respondents for describing the firm’s reputation.”

A study presented at the 2018 International Conference on Advances in Social Sciences and Sustainable Development found that the business media help a company “disseminate brand value and employ more outstanding staff, and the assistance is more significant with local media.” The same study also found that business media could increase the success of a company’s initial public offering.

Corporate executives, particularly those of public companies, should want media coverage, research has found. J. Felix Meschke, now a finance professor at the University of Kansas, examined how the market reacted when a chief executive officer was interviewed on financial news network CNBC and found an abnormally high return in the CEO’s company stock price before the interview and after it ended.

And CEOs should want coverage from well-known business news organizations. Alexander Dyck of Harvard Business School and Luigi Zingales of the University of Chicago found that stock prices react more strongly with the release of a company reports earnings when the media outlet reporting on its financial performance is more credible than other media.

The impact of what is reported and the relationship between a business journalist and company executives have also been documented. Yi Jin, in a master’s thesis at the University of Missouri in 2008, found a direct relationship between the tone of news coverage that a company receives on television news shows like NBC Nightly News, CBS Evening News, and ABC World News and the public perception on its corporate reputation. The more media coverage a company received, the worse its corporate reputation.

Journalists are “more reluctant to include highly negative performance information or make performance attributions that reflect poorly on the CEO’s leadership” when the executive became friendly with reporters, according to a study in Organization Science by James D. Westphal of the Ross School of Business at the University of Michigan and David L. Deephouse at the Alberta School of Business at the University of Alberta. Westphal and Deephouse also found that negative coverage in the media “has the potential to incite retaliatory behavior by the CEO. One possible form of retaliation is to limit or cut off communication with the offending journalist.”

When news outlets cut back on providing such information, consumers and businesses suffer. A decline in business journalism content more than a decade ago came at a time when coverage was needed the most—during the economic crisis that gripped the United States in 2007 and 2008. Mass communication researchers Daniel Riffe and Bill Reader disclosed that most consumers relied on newspapers for local business news at a time when those newspapers were cutting back such coverage. “The findings of this study do provide evidence that increased coverage of state and, especially, local business news is a worthy investment for newspapers,” wrote Riffe and Reader. Their study came out just as most newspapers began cutting back on business news.

A 2020 study from the Dukas Linden Public Relations firm supports the idea that investors are clamoring for more information during times of economic crisis. This study found that 56 percent of respondents wanted to see and read more stories about how a business planned to recover from the pandemic. And nearly half—46 percent—said they are reading and watching more business news than before COVID-19 reached the United States.

You’d think that after reviewing these research results, company executives and the public relations and investor relations professions that work for them would be aggressively courting the business news media for stories. As shown in later chapters, that hasn’t been in the case in the past decade. In example after example, companies have become adversarial toward the business media, even finding ways to deliver their communications using other outlets.

This is an excerpt from “The Future of Business Journalism: Why it Matters to Wall Street and Main Street” by Quinnipiac University School of Communications dean Chris Roush.