Media coverage and cash holding adjustments*

This paper investigates how companies adjust their cash holdings in response to media coverage. We find that firms with more media coverage and more negative tone of media coverage move the level of cash holdings faster toward the target level. More importantly, the association between media attention and cash holding adjustment speed is weaker for firms affiliated with business groups, indicating that close relationship between media and business groups impairs the monitoring role of media. These findings support the monitoring role of media in improving the efficiency in cash management.