Description:
The largest Big Tech firms in China, Baidu, Alibaba and Tencent (BAT), have been blamed for all sorts of social ills and come under intense regulations recently. This paper examines the charge against Big Tech that their market power damages product quality. I examine one type of products, TV series and movies, and use ratings on a popular review site as a proxy for product quality. The quality of dramas decreased fast after 2014 when BAT started producing more dramas. However, the drama production industry experienced an equity market boom and investment surge between 2014 and 2018 thanks to favorable policies, so it is unclear that BAT were primarily responsible for the deteriorating quality. In time-series regressions, drama quality is negatively related to the overvaluation of production companies but not negatively related to the dominance of BAT. Cross-sectionally, BAT are the best producer of TV series and not the worst producer of movies compared with public and private drama production companies. Overall, the recent drop in drama quality is mostly attributable to the overvaluation of and overinvestment by the industry, which might be exacerbated but not initiated by BAT