Media Slant, Erosion of Trust, and Financial Decisions
With Elizabeth Berger and Haaris Mateen
Abstract
We study the effect of media slant on household banking decisions. We use the staggered expansion of a local TV news station operator with a slant towards national events with emphasis on negative interpretations. We find that depositors shift deposits from national to local banks in areas exposed to the news media shock. Likewise, borrowers, especially low-income borrowers, shift their borrowing activity. Banks do not engage in credit rationing, change loan and deposit rates to attract consumers, or alter branching networks. Our evidence suggests that an erosion in trust drives these results. In sum, media slant alters household financial decision making and these decisions have re-sortative, and perhaps negative, welfare consequences.