Sung Eun Kim TABLE 1.Summary Statistics of Auto-Recall Reporting Official Newspapers Nonofficial Newspapers Min Mean Max. Min. Mean Max. Total 0.0% 13.0% 66.1% 0.0% 15.6% 61.7% By Recall Size and Manufacturer Small-Scale Recalls (#10,000) Domestic 0.0% 10.0% 57.6% 0.0% 12.1% 63.6% Joint Venture 0.0% 11.7% 59.6% 0.0% 16.2% 57.9% Foreign 0.0% 12.2% 66.9% 0.0% 13.3% 62.4% Large-Scale Recalls(#>10,000) Domestic 0.0% 11.2% 45.5% 0.0% 16.0% 59.1% Joint Venture 0.0% 18.5% 77.8% 0.0% 23.5% 80.0% Foreign 0.0% 21.6% 100.0% 0.0% 27.6% 100.0% By Recall Type Electrical System 0.0% 13.8% 68.5% 0.0% 17.4% 64.0% Engine 0.0% 13.1% 65.1% 0.0% 14.8% 64.2% Steering 0.0% 12.9% 67.6% 0.0% 15.5% 62.2% Brake 0.0% 13.8% 65.3% 0.0% 14.7% 68.8% Note:Entries indicate the statistics for the proportion of recalls covered by a newspaper out of all recalls. The statistics are based on the observations of 121 newspapers. types of recalls.Large-scale recalls receive more me- EMPIRICAL ANALYSIS dia attention than small-scale recalls across newspa- & pers.Reasons for recalls(e.g.,defects in engine,steer- Media Bias against Foreign Firms: ing,or electrical system)may also account for some Government-Driven versus Demand-Driven variations in the reporting pattern.On the crucial ques- tion of whether newspapers distinguish between do- I first examine whether newspapers are more likely to mestic and foreign automakers,both official and nonof- cover recalls involving foreign automakers than recalls ficial newspapers seem to pay more attention to recalls involving domestic ones.In this analysis,the dependent by foreign automakers than the ones by domestic or variable Yikr is a binary indicator Report that is coded joint-venture producers.For the case of large-scale re- 1 if the newspaper i located in a province j published calls,official newspapers report 11.2%of domestic car a news story about the recall event k announced in a recalls on average,but the figure is double for foreign time periodt,and 0 otherwise.I use the binary indicator car recalls (21.6%).Likewise,nonofficial newspapers because most recall events are covered only once by 235.5010 on average report more on foreign car recalls(276%) each newspaper.The binary probit models are specified than domestic ones (16.0%). as follows: This comparison between official and nonofficial newspapers may lead one to conclude that both types Pr(Yijk =1)=(a+B Foreignk B2Officiali of newspapers exhibit bias toward domestic compa- nies by underreporting their recalls.Nonetheless,a few +B3Official*Foreignik considerations should be made prior to drawing such +8Zk+4j+), a conclusion.First,one should account for confound- ing factors (e.g.,severity of recalls,reasons for recalls, where Foreign is a binary indicator for imported for- or temporal trend)that may explain such underreport- eign cars;Official is a binary indicator for official ing of domestic recalls.These factors may account for newspapers;vector Z denotes recall-level control vari- the seeming domestic-foreign distinction by either or ables;u is a vector of province fixed effects;and r both types of newspapers.The next section will exam- is a vector of half-year fixed effects.In construct- ine which type of newspapers exhibit a biased tendency, ing the binary indicator Foreign,I treat both do- if any,even when these factors are controlled.Second, mestic firms and domestic-foreign joint ventures as one should note the substantial variation of reporting nonforeign automakers because domestic companies patterns even within the same type of newspapers.As have at least a 50%stake in the operation of joint will be discussed,some official newspapers have a sig- ventures.15 nificantly greater incentive to protect the domestic au- The main parameters of interest are B1,the coeffi- tomobile industry than other official newspapers.The cient for Foreign,denoting a degree of bias exhibited by next section will examine whether such a difference commercial newspapers,and B3,the coefficient for the in protectionist incentives can account for reporting patterns across official newspapers,in a way consistent with the theoretical expectation. 15 I also estimate the models separating purely domestic companies from joint-venture companies,as presented in Appendix Table A17 960Sung Eun Kim TABLE 1. Summary Statistics of Auto-Recall Reporting Official Newspapers Nonofficial Newspapers Min. Mean Max. Min. Mean Max. Total 0.0% 13.0% 66.1% 0.0% 15.6% 61.7% By Recall Size and Manufacturer Small-Scale Recalls (# < 10,000) Domestic 0.0% 10.0% 57.6% 0.0% 12.1% 63.6% Joint Venture 0.0% 11.7% 59.6% 0.0% 16.2% 57.9% Foreign 0.0% 12.2% 66.9% 0.0% 13.3% 62.4% Large-Scale Recalls (# > 10,000) Domestic 0.0% 11.2% 45.5% 0.0% 16.0% 59.1% Joint Venture 0.0% 18.5% 77.8% 0.0% 23.5% 80.0% Foreign 0.0% 21.6% 100.0% 0.0% 27.6% 100.0% By Recall Type Electrical System 0.0% 13.8% 68.5% 0.0% 17.4% 64.0% Engine 0.0% 13.1% 65.1% 0.0% 14.8% 64.2% Steering 0.0% 12.9% 67.6% 0.0% 15.5% 62.2% Brake 0.0% 13.8% 65.3% 0.0% 14.7% 68.8% Note: Entries indicate the statistics for the proportion of recalls covered by a newspaper out of all recalls. The statistics are based on the observations of 121 newspapers. types of recalls. Large-scale recalls receive more me￾dia attention than small-scale recalls across newspa￾pers. Reasons for recalls (e.g., defects in engine, steer￾ing, or electrical system) may also account for some variations in the reporting pattern.On the crucial ques￾tion of whether newspapers distinguish between do￾mestic and foreign automakers, both official and nonof￾ficial newspapers seem to pay more attention to recalls by foreign automakers than the ones by domestic or joint-venture producers. For the case of large-scale re￾calls, official newspapers report 11.2% of domestic car recalls on average, but the figure is double for foreign car recalls (21.6%). Likewise, nonofficial newspapers on average report more on foreign car recalls (27.6%) than domestic ones (16.0%). This comparison between official and nonofficial newspapers may lead one to conclude that both types of newspapers exhibit bias toward domestic compa￾nies by underreporting their recalls. Nonetheless, a few considerations should be made prior to drawing such a conclusion. First, one should account for confound￾ing factors (e.g., severity of recalls, reasons for recalls, or temporal trend) that may explain such underreport￾ing of domestic recalls. These factors may account for the seeming domestic-foreign distinction by either or both types of newspapers. The next section will exam￾ine which type of newspapers exhibit a biased tendency, if any, even when these factors are controlled. Second, one should note the substantial variation of reporting patterns even within the same type of newspapers. As will be discussed, some official newspapers have a sig￾nificantly greater incentive to protect the domestic au￾tomobile industry than other official newspapers. The next section will examine whether such a difference in protectionist incentives can account for reporting patterns across official newspapers, in a way consistent with the theoretical expectation. EMPIRICAL ANALYSIS Media Bias against Foreign Firms: Government-Driven versus Demand-Driven I first examine whether newspapers are more likely to cover recalls involving foreign automakers than recalls involving domestic ones. In this analysis, the dependent variable Yijkt is a binary indicator Report that is coded 1 if the newspaper i located in a province j published a news story about the recall event k announced in a time period t, and 0 otherwise. I use the binary indicator because most recall events are covered only once by each newspaper.The binary probit models are specified as follows: Pr(Yi jkt = 1) = (α + β1Foreignk + β2Officiali + β3Official*Foreignik + δZk + μj + τt), where Foreign is a binary indicator for imported for￾eign cars; Official is a binary indicator for official newspapers; vector Z denotes recall-level control vari￾ables; μ is a vector of province fixed effects; and τ is a vector of half-year fixed effects. In construct￾ing the binary indicator Foreign, I treat both do￾mestic firms and domestic-foreign joint ventures as nonforeign automakers because domestic companies have at least a 50% stake in the operation of joint ventures.15 The main parameters of interest are β1, the coeffi￾cient for Foreign, denoting a degree of bias exhibited by commercial newspapers, and β3, the coefficient for the 15 I also estimate the models separating purely domestic companies from joint-venture companies, as presented in Appendix Table A17. 960 Downloaded from https://www.cambridge.org/core. Shanghai JiaoTong University, on 26 Oct 2018 at 03:53:05, subject to the Cambridge Core terms of use, available at https://www.cambridge.org/core/terms. https://doi.org/10.1017/S0003055418000242