Political Bias in Corporate News: The Role of Conglomeration Reform in China

Using textual analyses of 1.77 million articles, we find that, through the Chinese government's conglomeration reform that reorganizes official and nonofficial newspapers from the same locale into a news group under state control, there is an increase (decrease) in positive tone and political content in official (nonofficial) newspaper articles. The evidence is consistent with official newspapers becoming more concentrated on political goals and nonofficial newspapers becoming more focused on commercial objectives, thus better enabling the newspaper industry to pursue a dual role as the government's mouthpiece and an information institution supporting the market economy. Our results are robust to using a matched firm-month research design that examines the content of articles written about the same firm in the same month, a matched firm-event approach that examines concurrent newspaper articles published immediately following corporate earnings announcements, and a difference-in-differences approach to test for conglomeration effects.