This study employs the linguistic analysis for the construction of media reputation proxies (including media coverage and news sentiment) and investigates the relationship between media reputation and firm performance by examining the stocks of all firms listed on the Taiwan Stock Exchange. We apply two-stage least squares regression model to deal with the potential endogeneity problem between media reputation and firm performance arising from firm-specific characteristics. The results suggest that firms attract media coverage outperform those firms without such coverage; they also indicate that previous media reputation has a significantly positive impact on current firm performance, as measured by the market-to-book ratio and the return on assets, whilst media reputation is found to have a negative impact on stock market returns, with higher media attention potentially following a reversal in stock market expectations and returns (Barber & Odean, 2008; Fang & Peress, 2009). Besides, the superior firm performance could enhance the subsequent corporate media reputation. Further, we document that when taking the business cycle into consideration, asymmetric influences are discernible between media reputation and firm performance. Generally, the results reveal bi-directional interaction between media reputation and firm performance, and therefore firms do to improve profitability also enhance their media reputations.
Media reputation, Firm performance, Media coverage, News sentiment, Business cycle