Role of Media Coverage in Keeping Lid on Government Expenses

Zhang Qi  , Bu Danlu and Yu Zhi
Research Institute of Government Accounting, Zhongnan University of Economics and Law, Wuhan, China  
School of Accounting, Southwestern University of Finance and Economics, Chengdu, China  
Business School, University of International Business and Economic, Beijing, China  
Abstract: Information monopoly of bureaucrats helps them maximize discretionary  
budget. Public disclosure of budget can alleviate information asymmetry between  
government and the public and empower public supervision on government budget. With  
information intermediary function and reputational governance function, the media exert  
a budget intervention effect in the public disclosure of government budget, which further  
increases the effect of government budget disclosure. This paper investigates how media  
reports influence “three public expenses” (TPE) budget planning of central government  
departments by examining media reports on the disclosure of budget and final accounts  
and using TPE budget as a proxy variable for discretionary budget of bureaucrats. We have  
reached the following findings: (1) The higher the TPE budget implementation rate, the  
greater budget growth will be. But this correlation can be restrained by media attention;  
(2) Different stance of the media may exert different governance effects on TPE budget.  
Good news about TPE may motivate bureaucrats to restrain the positive impact of TPE  
budget implementation on budget growth. However, bad news about TPE will exert its  
budget intervention effect only when administrative governance mechanism intervenes.  
This study has broadened research on the media’s governance effect from the perspective  
of government budget transparency and verified that under China’s unique institutional  
background, the media may still play a positive role in public sector governance.  
Keywords: media attention, stance of media report, public opinion environment, “three  
public expenses” budget  
JEL Classification Codes: H83, P16, D73
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