Media Coverage, Strategic Inertia and Firm Performance: Evidence from Chinese Listed Companies

Abstract

Abstract: At information age, media serves as an opinion leaderthat shapes firms' external information environment. However, there are mixed conclusions about whether media affects firm decision-making and other behaviors. Drawing on the perspective of issue salience about strategic cognition and stakeholder theory, the present paper explores the relationship among media coverage, strategic inertia and firm performance as well as the moderating role of firm ownership and size. Using the analysis of random effects model on the basis of Chinese A-share listed companies during 2010-2014, we conclude that firms which received higher media evaluation tend to be inertial in the current strategy and then benefit from this inertia. Further study finds that compared with non-state-owned firms, media coverage has a stronger effect on strategic inertia and strategic inertia has a weaker impact market value for state-owned firms, while there is no difference in the relationship between strategic inertia and firm financial performance among different ownership. We give an explanation from the view of implicit exchange, which argues that for several social tasks undertaken by state-owned firms, government compensates them in an implicit way. Additionally, firm size also plays a moderating role between media coverage and strategic inertia as well as the relationship between strategic inertia and firm performance. In contrast with small-sized firms, media coverage has a stronger effect on strategic inertia and strategic inertia has a stronger effect on firm performance for large-sized firms. We also show that firm ownership and size have a joint moderating effect among media coverage, strategic inertia and financial performance. Our study extends the application of strategic cognition into strategic choice processes, which is conducive to improving the quality of firms' decision-making.

Key words: strategic cognition, media coverage, strategic inertia, ownership, firm size, firm performance

Ji Yang, Zhou Erhua, Jiang Guoyin. Media Coverage, Strategic Inertia and Firm Performance: Evidence from Chinese Listed Companies[J]. Management Review, 2020, 32(6): 266-279.

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