Media Attention and Labor Investment Efficiency*

This study investigates whether firms make efficient labor investment decisions in response to media attention. The results show that media attention lowers labor investment efficiency, not through over-firing but through over-hiring, under-firing, or under-hiring. We interpret these findings as firms' intentional adjustment of their labor resources to recover from or preempt reputational damage. Overall, the media's pressure effects on labor investment efficiency suggest that media coverage can serve as friction in firms' labor investment decisions, highlighting the relatively unexplored role of the media compared with its monitoring function.