Local media have positive slant toward local businesses, Rice University expert finds

EXPERT ALERT

David Ruth
713-348-6327
david@rice.edu

Jeff Falk
713-348-6775
jfalk@rice.edu

Local media have positive slant toward local businesses, Rice University expert finds

HOUSTON – (Feb. 27, 2015) – When local news media report about hometown companies, they use fewer negative words than when reporting about nonlocal companies, according to research by business experts at Rice University and the University of Texas at Dallas.

Credit: Rice University's Jones Graduate School of Business

Alex Butler, a professor of finance at Rice’s Jones Graduate School of Business, said this positive slant is not coincidental; it’s the result of local companies’ advertising expenditures in local media outlets. This positive media bias, or hype, creates a conflict of interest and can affect firm values, particularly those of smaller firms. Butler co-authored the 2012 study “Don’t Believe the Hype: Local Media Slant, Local Advertising and Firm Value” with Umit Gurun, an associate professor of accounting at UT Dallas.

A new animated video helps illustrate Butler and Gurun’s findings. To view the video, go to https://vimeo.com/118066604. Butler is available to comment on his study’s findings and their implications.

“This local media hype matters because people tend to invest disproportionately in companies that they are geographically close to, so investors need to consider strongly the nature of the information local news provides before making investment decisions,” Butler said. “But there is good news. Although advertising may create a conflict of interest for local media, the national media do not exhibit such a bias. So when investing, do your homework. Check what the national media are writing, and don’t believe the hype.”

For more information about Butler’s research, visit the Jones School’s website: http://business.rice.edu/hype. To schedule an interview with Butler, contact Jeff Falk, associate director of national media relations at Rice, at jfalk@rice.edu or 713-348-6775.

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Follow the Jones Graduate School of Business on Twitter @RiceMBA.

Follow Rice News and Media Relations on Twitter @RiceUNews.

Related materials:

Butler bio: http://butler.rice.edu.

Jones Graduate School of Business: http://business.rice.edu.