The role of the media in holding the government to account is well documented, but research from Cambridge Judge Business School suggests that the opposite is also likely to be the case. The study examines how government decisions affected the media coverage of US banks during the financial crisis. It found that the media was typically less critical of banks that had received government bailouts.
“We show that negative media evaluations decreased with government support of the potentially misbehaving banks, and increased again when banks exited the support program,” the researchers explain.
Tail wagging the dog
The standard narrative is that it’s the media that influence government action, not the other way round, but the research highlights how influential government actions are in terms of media reporting as well.
The authors identify both the government and the media as “social control agents”, that are able to influence public opinion. They revealed that just under a third of the biggest US banks received government support via the Troubled Assets Relief Plan (TARP) in 2008.
Banks as a whole were widely condemned for the reckless behavior that many believed contributed to the crisis, but the TARP was largely defended on the grounds that it would ensure financial stability in the sector. This conclusion was reached after looking at the coverage the 26 largest banks received between 2007 and 2011 in the Washington Post, New York Times and Wall Street Journal.
“Overall, our results show that state support tends to attenuate negative media coverage for misbehaving banks and that severing this tie bring back negative evaluations,” the authors explain. “We can conclude that the media scrutinize the link between potentially misbehaving organizations and the government through government bailouts, and that when the link is present they factor it positively in their evaluation of misbehaving organizations.”
Strong ties
This was particularly evident when banks cut ties, as when banks exited the TARP program, the negative coverage they received from the press returned to normal levels again. The findings highlight the crucial role the government plays in guiding media output.
“The media will pay particular attention to the actions of the government because of its formal authority to set norms within society as well as adjudicate and punish norm violations,” the researchers explain. “Therefore, when the government reacts towards an organization under suspicion of misconduct by supporting this organization instead of punishing it, the media will interpret this cue as implying the targeted organization’s behavior is socially acceptable.”
As a result, the government’s response to the behavior of the banks, and apparent support for those that misbehaved, appeared to reduce any initial ambiguity that may have surrounded the potential misconduct.
“Irrespective of whether media fully interpret government support of a transgressing organization as resolving moral ambiguity around the potential misconduct, such support by the state can signal to the media the overall legitimacy of the transgressing organization,” the authors conclude.
