The Value of Visibility
94 Pages Posted: 12 Nov 2015 Last revised: 28 Dec 2021
Date Written: December 27, 2021
We analyze the relation between firm visibility and stock returns using comprehensive news coverage data of U.S. firms. Carefully controlling for firm characteristics, we find that persistently higher levels of firm visibility predict higher returns. Visibility also predicts higher sales and profitability growth, as well as improvements in corporate governance like, for example, enhanced performance-induced CEO turnover. The visibility return premium is concentrated in earnings announcement months and industry-years when the visibility-fundamentals sensitivity is high. Overall, the evidence is consistent with visibility creating value through a monitoring and advertising channel, while stock markets underprice the benefits of firm visibility.
Keywords: Media Coverage, Visibility, Returns, Corporate Governance, Profitability
JEL Classification: G12, G14
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