When Is Good News Bad and Vice Versa? The Fortune Rankings of America's Most Admired Companies

58 Pages Posted: 24 Jul 2015 Last revised: 28 Jan 2017

See all articles by Yingmei Cheng

Yingmei Cheng

Florida State University - College of Business

Baixiao Liu

Florida State University

John J. McConnell

Purdue University

Aaron Rosenblum

Florida State University - Department of Finance

Date Written: January 27, 2017

Abstract

Prior theory postulates that media coverage can increase (decrease) the value of a manager’s reputational capital and, as a consequence, enhance (diminish) his power to extract corporate resources for private consumption. An empirical implication that follows is that media events that increase (decrease) a manager’s reputational capital are good (bad) news for the CEO and bad (good) news for shareholders. We examine these predictions using increases and decreases in Fortune’s rankings of America’s Most Admired Companies as a measure of media-induced changes in CEO’s reputational capital. Consistent with the predictions, we find that increases (decreases) in ranking scores are associated with stock price decreases (increases). Further, and also consistent with the predictions, CEOs whose firms experience increases (reductions) in ranking scores experience increases (reductions) in compensation and in job tenure, and their firms undertake more (fewer) acquisitions and the acquisitions are less (more) value increasing.

Keywords: Corporate Media Ranking; Corporate Value; CEO Compensation; CEO Turnover; Acquisitions

JEL Classification: G31; G32; G34

Suggested Citation

Cheng, Yingmei and Liu, Baixiao and McConnell, John J. and Rosenblum, Aaron, When Is Good News Bad and Vice Versa? The Fortune Rankings of America's Most Admired Companies (January 27, 2017). Available at SSRN: https://ssrn.com/abstract=2635230 or http://dx.doi.org/10.2139/ssrn.2635230

Yingmei Cheng

Florida State University - College of Business ( email )

423 Rovetta Business Building
Tallahassee, FL 32306-1110
United States
850-644-7869 (Phone)

Baixiao Liu (Contact Author)

Florida State University ( email )

Tallahasse, FL 32306
United States

John J. McConnell

Purdue University ( email )

MGMT, KRAN
403 West State St.
West Lafayette, IN 47907-2056
United States
765-494-5910 (Phone)
765-494-7863 (Fax)

Aaron Rosenblum

Florida State University - Department of Finance ( email )

Tallahassee, FL 32306-1042
United States

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