The effects of media on financial stability.

Abstract

My thesis investigates the topic regarding media effects and financial stability, which makes valuable contributions to the current literature and financial industry. Through the study of this thesis, it reveals that the media can indeed manipulate financial stability via controlling different aspects of media, including the type, concept, the post information, the sentiment etc. I believe the findings of thesis would be benefit for not only the policy makers but the individuals who desire to invest in financial market. Specifically, the findings of my thesis would help the policy makers aware of the media power to adjust their monitor level of media industry. At the same time, individual investors may seek opportunities via media platforms and information posted on Twitter. For those who intend to explore links between media and financial world, this thesis would help them establish a better view of current literature and research outcomes related to media and financial aspects. For indicating different aspects of media effects, this thesis focuses on three research questions, which are presented as separate chapters 1-3. In chapter 1, I focus on the effects of two media formats (traditional and modern media) and three media concepts (media freedom, concentration and ownership) on financial stability. For defining financial stability, I distinguish it into two specific aspects, which are banking stability and financial market stability. Multi types of regression models (OLS, 2SLS and GMM) are applied to analyse the relationship based on data analysis of OECD countries from 2002 to 2016. After the empirical analysis, I find that TV and the Internet both have significant negative effects on financial stability. For other media formats and factors such as Radio, Newspaper, and media freedom, the influence behaves differently depending on the financial environment (banking or financial market). Chapter 2 is related to social media and financial stability, which investigates how the volume of Tweets and sentiment of Tweets could affect financial stability, established by the banking stock market stability and trading volume. After using a sample including 73 listed banks selected from the NYSE and FTSE 100 index, the primary results indicate that both Tweets volume and Tweets sentiment have significant effects on banking stock market stability and stock trading volume., The novel finding is from the Tweets sentiment, as the number of sentiment Tweets show opposite effects on stock market stability compared with the number of Tweets. Specially, the Tweets volume show a significant positive effect on stock market stability, yet a significant negative effect of sentimental Tweets on stability. The results of this chapter indicate the importance of sentimental information and thus, we should pay attention to information with strong sentiment on a social media platform. As we know, in 2020, the global pandemic of COVID-19 came across as an unpredictable, unexpected and rare event to the world. The governments around the world announce and carry out strict regulations to control the spread of the COVID-19. For supporting the firms especially during the quarantine, the governments also inject funds into businesses and increase interest rates. Based on that, in Chapter 3, my purpose is to investigate and compare the media coverage and real factor effects of COVID-19 on financial stability from the bank liquidity and bank stability aspects, viewing from three different time waves based on weekly data from six countries with over 30,000 observations from 1st March 2020 to 1st March 2022. The results indicate that both media coverage and real factors of COVID-19 significantly affect bank liquidity and bank stability, and most of the real factors could be harmful to bank liquidity and stability, yet some evidence shows a benefit could exist such as the number of vaccinations. Based on the results, we should continue following the government’s suggestions and getting vaccination.