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Investor Recognition Hypothesis, Firm Value and Corporate Governance: Evidence from Media Coverage on CEOs
Abstract
This research investigates whether media coverage on CEOs, as a proxy for investor recognition of firms, affects firm value and governance. From a sample of Fortune500 companies from 1992 to 2002, we handcraft two indexes of Media Coverage and Positive Media Coverage on CEOs, and find that firms whose CEOs attract high media coverage are associated with higher Tobin's Q. Positive media coverage, dubbing CEOs as "visionary", "charismatic", "legendary", etc. gives firms higher valuation. The result remains consistent to various econometric methods and after controls for CEO ability, firm characteristics, governance variables, firm size and industry. Portfolios of firms whose CEOs attract the highest media coverage outperform portfolios of firms with the lowest media coverage by 8% per year. More importantly, media coverage affects firm governance, allowing mediatic and charismatic CEOs to get bigger compensation and longer tenure.
... Furthermore, they show that investors are more willing to invest in companies with charismatic leaders even if the firms are seemingly in trouble and charismatic leaders are able to turn stakeholder perceptions around and make negative news seen in a more positive light. Nguyen-Dang (2005) One concern here is the tendency of capital markets to dismiss intangible assets as long as their benefits are not realized in earnings (Aksoy et al., 2008). For instance, Edmans (2011) finds that intangibles reflect on the stock price only when it manifests in tangible outcomes that are valued by the market. ...
In einer zunehmend vernetzten Welt befinden sich Unternehmen in einem komplexen Beziehungsgeflecht aus verschiedenen Akteuren. Dies stellt eine Herausforderung für die Existenz traditioneller Geschäftsmodelle dar, da Firmen sich mit Konkurrenz aus allen Richtungen auseinander setzen müssen. In einem solchen Geschäftsumfeld werden immaterielle Vermögenswerte zunehmend als Grundlage für Wettbewerbsvorteile angesehen. Die Dissertation untersucht den materiellen Nutzen immaterieller Vermögenswerte und konzentriert sich dabei insbesondere auf die Unternehmensreputation und deren Einflussfaktoren. Wir verwenden als Theorie den Ressourcen-basierten Ansatz des Unternehmens und leiten unsere Hypothesen aus der vorhandenen Literatur ab, insbesondere in den Bereichen Reputation, Führung, Stakeholder-, Legitimitäts- und Signaling-Theorie. Unsere Analysen sind auf Umfragen des Manager Magazins und „Gold Bee Corporate Responsibility Assessment System“ basiert. Bei der Durchführung der quantitativen Analyse verwenden wir Strukturgleichungsmodelle. Die Implikationen dieser Dissertation lassen darauf schließen, dass es einen Business Case für ein aktives Reputationsmanagement sowohl auf Unternehmensebene als auch auf individueller Ebene für Führungskräfte, vornehmlich für den CEO, gibt. Weiterhin ist eine hohe Reputation ein nachhaltiger Wettbewerbsvorteil, da sie die Wettbewerbsposition des Unternehmens gegenüber den Wettbewerbern stärkt und potentiell neuen Wettbewerbern den Markteintritt erschwert. In ähnlicher Weise kann eine hohe CEO-Reputation als Instrument der Risikoreduzierung in Krisenzeiten genutzt werden. Außerdem zeigen unsere Ergebnisse, dass die ausschließliche Einhaltung von Regeln und Regulierungen nicht mehr ausreichend ist. Damit die Stakeholder Fortschritte belohnen können, muss das Management CSR-Programme etablieren, die bei ihren Stakeholdern Resonanz finden, und darüberhinaus kontinuierlich über die CSR-Leistungen ihres Unternehmens berichten.
The much-heralded transformation of corporate governance by ‘intellectual currents in finance and economics and new transactional developments’ (Romano, 2005a, p. 359) notwithstanding, corporate governance controversies continue. This chapter uses the lens of contract/governance to examine the huge disparities between the theory of the board of directors as vigilant safeguard for the interests of the equity investors and the board of directors in practice.1 What is responsible for these disparities? How should they be interpreted? What should be done?
I examine the potential economic value of CEO reputation: performance improvement at the firm level and job retention benefits to the CEO. Two perspectives on CEO reputation offer different predictions regarding the benefits of CEO reputation. The ability perspective in the agency literature advocates the economic benefits of CEO reputation. The symbolic image perspective from recent CEO reputation studies, however, argues that CEO reputation does not necessarily improve firm performance or CEO job retention. I investigate which perspective is more consistent with empirical evidence. The results of firm performance tests show that CEOs with well-established reputations are able to sustain good firm performance but do not turn around poor performance in the near term. These results imply that stakeholders might have to consider replacing the CEO - no matter how highly regarded - with a turnaround specialist when a firm suffers financially. Another finding from job security tests shows that CEOs with high reputation are more likely to be dismissed than CEOs with low reputation when they perform poorly. These results suggest that the reputations of CEOs through promoting their own images in the media do not necessarily secure their job titles.
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