Media competition and earnings management: evidence from China's county newspaper conglomeration reform

This study examines whether and how media competition affects earnings management among private firms in China. We exploit China’s county newspaper conglomeration reform as an exogenous shock that fundamentally altered the competitive structure of local media markets. Our empirical analysis reveals that heightened media competition significantly constrains firms’ earnings management activities. This effect is particularly pronounced for firms in highly competitive markets, with more informational barriers, and facing less local policy uncertainty. Conversely, the effect is weaken in regions experiencing commercial newspaper exit. Mechanism analysis reveals that the reform increased commercial-oriented reporting by nonofficial newspapers. This shift in reporting incentives strengthened the media’s role as a corporate monitor. Our findings provide important insights into the governance benefits of media competition and its impact on private firms’ financial reporting quality.