This paper analyzes the relation between firm visibility and stock returns. For this, it uses a novel dataset on New York Times coverage of U.S. firms from 1924 to 2013.
The authors find that firms with persistently higher levels of media coverage exhibit predictably higher returns, with top-quintile coverage stocks outperforming bottom-quintile coverage stocks by 2.64% per year. Higher media coverage is also found to predict significant improvements in corporate governance, as well as higher sales growth and profitability growth.
The authors argue that their results are consistent with visibility creating value through monitoring and advertising, and stock markets inadequately pricing the positive effects of firm visibility. What we like about this paper1 is that it uses an original data source for predicting stock returns, over a long sample period covering multiple economic cycles.
The findings are intriguing and seem plausible, but appear to be inconsistent with previous studies which have established that attention-grabbing stocks tend to underperform, such as stocks which high share turnover.
1A. Hillert and M. Ungeheuer, “The Value of Visibility”, SSRN working paper, no. 2689652, 2017.
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