The Value of Visibility
88 Pages Posted: 12 Nov 2015 Last revised: 19 Mar 2021
Date Written: March 19, 2021
We analyze the relation between firm visibility and stock returns using comprehensive data on news coverage of U.S. firms ranging from 1924 to 2019. Carefully controlling for firm characteristics, we find that firms with persistently higher levels of visibility exhibit predictably higher returns. Visibility also predicts improvements in corporate governance, higher sales and profitability growth. The visibility return premium is driven by earnings announcement months and industry-years when the visibility-fundamentals sensitivity is high. 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
Suggested Citation: Suggested Citation