Does CEO media coverage affect firm performance?

Authors: Hsiang-Hsuan Chih; Yu-En Lin; Wei-Ru Chen; Pin-Huang Chou;

Journal: Chia Da Management Review. Jun. 2009, 29(1): 139-173.

Keywords: Media coverage; Firm performance; Behavioral finance

Abstract:
In this paper, we provide an empirical analysis of the impact of CEO media coverage on the corporate fundamental and market value constructing the media coverage of Taiwan CEO database. We find that CEO media coverage significant affects the cognition of the public, and further influence firm's operating performance. We also find that whether CEO media coverage provides information about firm's fundamentals, it will simulate investors' trading behavior and fluctuate the stock returns. The empirical results of this paper arc summarized as follows. First, the media pay more attention to the firm CEOs with better ROA, worse stock return, larger size, older age and group firms. Second, the CEO media coverage affects ROA positively in the short run because of efficient operation, while negatively in the long run because of worse profitability. Third, the bigger amount of CEO' media coverage is, the larger the drop in the current and future stock returns. The main reasons are information asymmetry and the market investors' overreaction. Finally, if the firms have more positive media coverage, the market performance will decline but the ROA will increase. Comparing with the group firms, the non-group firms can increase ROA by increasing CEO media coverage, especially positive or company-related news.