Research On The Relationship Between Chinese Listed Companies’ Media Reputation And Firm Performance From The Perspective Of CEO’s Responses

In the transition period, media serves as’Opinion Leader’to the public which deeply changed Chinese companies’decisions and operations. Strategic scholars argued that media reputation, as a strategic resource, was valuable, rare, nonsubstitutable and imperfectly imitable. Although scholars examined the effect of media coverage and reputation on firm behavior and outcomes, there are still some shortcomings after our literature review as follows:firstly, they put more attention on negative coverage but ignore the influence of positive coverage; secondly, research on the mechanism of media coverage to firm outcomes only explored traditionally economic factors but were rarely involved in social and psychological factors of audience; thirdly, the relationship between reputation and firm performance is well-known, but the middle mechanism is still uncovered.In order to examine the relationship between media reputation and firm performance and the middle mechanism in Chinese context, we proposed the theoretical model of media reputation-firm performance from the perspective of CEO responses by integrating media system dependency theory, upper echelons theory and reputation theory. Our model suggests that media reputation has the function of signal transmission and social status similar to reputation, which evolves into the function of illusion, pressure and incentive that impacts CEO. That is to say, media reputation is by CEO overconfidence, commitment to status quo and interests claims further to firm performance. The theoretical mode provides the fundamental frame for subsequent analysis.At first, our study examined the relationship between media reputation and firm performance. Through the two stages of theoretical hypothesis and empirical analysis, we separately use weighted least squared regression and systematic GMM estimates to confirm the inference that media reputation is as strategic resource. In the meantime, sample elective bias, multicollinearity and heteroscedasticity are controlled to ensure the reliability of statistical analysis. Moreover, we also analyzed the time effect of media reputation on firm performance. The analysis showed that the influence of media reputation is significant in the current and next period. Based the relationship between media reputation and firm performance, we further the middle mechanisms derived from the theoretical model.The first is illusion mechanism which is mediated by CEO overconfidence. The second is pressure mechanism which is mediated by CEO commitment to status quo that is measured by content analysis to periodical and annual report. The third is incentive mechanism which is mediated by CEO interests claims that is measured alternatively by CEO compensation. We collected data of123total samples which are traded in Shanghai and Shenzhen Stock Exchange between the year of2010-2013from14pieces of financial newspaper and CSMAR. We use coefficient of media favorableness to measure media reputation and constructed regressive model based on mediation test methods proposed by Wen (2004). Combined with extant data, we draw the conclusions as follows. Media reputation may lead to CEO overconfidence which further impairs firm performance and the effect of media reputation on firm performance exists in the current period. And similarly media reputation may result in CEO commitment to status quo and CEO interests claims which are all good for firm performance, and the latter two mechanisms exist in the current and next periods. Furthermore, CEO power positively moderated the relationship between CEO overconfidence and firm performance. In high power firms, CEO overconfidence is more detrimental to firm performance. industry competition moderated the relationship between CEO commitment to status quo and firm performance. In fierce-competition industry, CEO commitment to status quo is detrimental to firm performance. Contrary to fierce-competition industry, CEO commitment to status quo is beneficial. Firm ownership may moderate the relationship between media reputation and CEO interests claims. In non-stated companies, media reputation has stronger effect on CEO interests claims. Our study on the relationship between media reputation and firm performance and the middle mechanism is a try to Chinese research on media reputation, and extended the study on CEO overconfidence, commitment to status quo and interests claims. Based on our conclusions, we put forward the following managerial decisions including nurturing and utilizing media reputation, administering control on CEO power, building smooth the mechanism of interests claims. We believed that our advice will be good for fulfilling the positive effect of media reputation on firm performance.