In the spirit of a weekend diversion, I would like to take another shot at exploring Turkish media and politics (you can read my previous posts on the topic here and here). Amidst cries from MM (media mogul) Dogan's newspapers that the government was clasping on media freedom, I was curious when I recently stumbled upon a paper that looks at the relationship between media freedom and FDI: Nabamita Dutta and Sanjukta Roy, both from West Virginia University, find that FDI is a major determinant of media freedom in their panel of 115 countries, 20 years. The argument is that foreign investment to the media sector makes it financially stronger and more advanced, while at the same time improving the economic environment as a whole, which in turn enhances media freedom further. Makes perfect sense, but...
Even if we ignore the fact that it is really difficult to measure media freedom, I have been interested in FDI enough to coauthor a paper on the determinants of FDI (an enhanced version of the paper written by coauthors is here), so I know enough about the literature to tell a different but equally logical story: It is also plausible that foreigners decide to invest in the media sector when they are sure that they will not be tempered by the government, i.e. when the media is free to begin with and certain institutions are in place to ensure a stable economic environment. It is true that the authors of the paper use econometric methods to rule out my version of the story in favor of their version. Rather than go into a dry discussion of my take on their methodology, let me offer an alternate methodology. Let's do a very simple event study: While it has received some FDI in the past couple of years, Turkish media is no better (or worse) in terms freedom than it was in 2005 (for a longer and better introduction to event studies, see Chapter 1 of the Handbook of Corporate Finance: Empirical Corporate Finance)!!!
Joking aside, I am not sure panel regressions are the right way to tackle media freedom. While certain variation between countries such as rule of law and other pillars of economic environment can be measured, for other measures (such as whether media groups can be involved in other business activities, be part of conglomerates or whether there are political connections between media groups and the government- to which I will return in a future post) there is not much cross-country or time series data. And I am still not sure how many points to deduct from the media freedom index when the PM spies on journalists' dinner table conversations and asks his supporters not to buy certain newspapers...
Even if we ignore the fact that it is really difficult to measure media freedom, I have been interested in FDI enough to coauthor a paper on the determinants of FDI (an enhanced version of the paper written by coauthors is here), so I know enough about the literature to tell a different but equally logical story: It is also plausible that foreigners decide to invest in the media sector when they are sure that they will not be tempered by the government, i.e. when the media is free to begin with and certain institutions are in place to ensure a stable economic environment. It is true that the authors of the paper use econometric methods to rule out my version of the story in favor of their version. Rather than go into a dry discussion of my take on their methodology, let me offer an alternate methodology. Let's do a very simple event study: While it has received some FDI in the past couple of years, Turkish media is no better (or worse) in terms freedom than it was in 2005 (for a longer and better introduction to event studies, see Chapter 1 of the Handbook of Corporate Finance: Empirical Corporate Finance)!!!
Joking aside, I am not sure panel regressions are the right way to tackle media freedom. While certain variation between countries such as rule of law and other pillars of economic environment can be measured, for other measures (such as whether media groups can be involved in other business activities, be part of conglomerates or whether there are political connections between media groups and the government- to which I will return in a future post) there is not much cross-country or time series data. And I am still not sure how many points to deduct from the media freedom index when the PM spies on journalists' dinner table conversations and asks his supporters not to buy certain newspapers...
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