Yielding to conformity: how celebrity CEOs influence media reactions to M&As in China

This study provides a behavioral framework by demonstrating whether and how social beliefs influence conformity bias. To understand when the media hypes certain investment behaviors, this research develops arguments of conformity bias and outlines the attribution process of media coverage. The paper argues that the evident assessment by authoritative financial media shapes the degree to which the media allocates its attention and offers opinions on mergers and acquisitions (M&As). Using a sample of 1532 Chinese M&As from 2008 to 2018, this study analyzes the impact of celebrity CEOs on the media reactions to M&As. Results show that media coverage of M&As biases attention and provides more favorable coverage to acquiring firms led by celebrity CEOs. This finding presents clear evidence that the media deviates from accurate reporting and falls into the trap of conformity bias by imitating celebrity CEOs when shaping narratives. Moreover, firm performance and CEO tenure amplify the positive association between CEO celebrity and favorable media reactions to M&As. Interestingly, findings across publications indicate that market-oriented media exhibit more positive reactions to CEO celebrity than state-controlled media do, which reflects the power of cognitive heuristics in any competitive information market. These findings are consistent with attribution theory and suggest that media can be biased when conforming to the preconceptions of authoritative social evaluators. Attribution theory also helps explain the incentives for external evaluators, who are important monitors in corporate governance. This study builds a bridge between media bias and the information market by assessing implicit bias in media reactions to M&As. The findings also serve as a caution for stakeholders to be more vigilant in assessing the subjectivity of information, particularly media narratives about high-profile CEOs.