Project Details
Projekt
Advertising Bias in Newspapers
Subject Area
Accounting and Finance
Term
from 2014 to 2020
Project identifier
Deutsche Forschungsgemeinschaft (DFG) - Project number 262445572
Newspapers are subject to pressure from various groups trying to influence their news coverage. Historically, newspapers in the US were financed by political parties and thus had a strong political bias. However, modern era newspapers finance themselves mainly via advertising revenues, making them largely independent from political influence. Unfortunately, this give rise to another channel of influence: newspapers now might feel pressured to please firms that advertise in them. If newspapers give in to such pressure, this leads to biased reporting about the firms that advertise and their products. Such a media bias is problematic, as readers rely on newspapers to provide them with objective information and base many important decisions on this information. If information is biased, this leads to suboptimal decisions. The ethical guidelines of many newspapers explicitly state that news reporting must not to be influenced by advertising. In this project, we will analyze whether news reports about a firm are indeed not influenced by advertising , or whether there is media bias due to advertising. The main part consists of an empirical study on the U.S. newspaper market. Using unique data on advertising spending by all firms in a comprehensive sample of newspapers and data on all newspaper articles about these firms, we can explicitly test for media bias for the first time. To do so, we will use computer-linguistic methods to measure the tone of each article. The three-dimensional nature of our datasets (we have data on the article tone as well as advertising dollars for each combination of firm, newspaper, and week) allows us to make a big step towards showing causality. Results from a pilot study are encouraging. We will also analyze, how exactly media bias manifests itself. For example, will newspapers post good news about firms that advertise on the front-page? Are bad news selectively omitted? Furthermore, we will investigate whether newspapers that rely on advertising revenues more heavily are also more likely to bias articles. In two additional extensions we will examine: 1. press coverage of the financial crises to answer the question when the press started to warn about a looming crises. Some commentators now argue that the news press rang warning bells early, but a formal analysis is missing. Linking back to the main part, we will also analyze whether newspapers that receive a lot of advertising revenue from the financial industry report about problems in the financial sector later. 2. the impact of the industry structure of newspaper markets. We will test hypothesis from theoretical models that predict a strong impact of the competitive structure of local newspaper markets on media bias. Overall, our expected findings are important because they question one of the central aspects of a free press, namely its independence from outside pressure and will have regulatory implications regarding the organization of newspaper markets.
DFG Programme
Research Grants
