Does Greater Public Scrutiny Hurt a Firm's Performance?

82 Pages Posted: 12 Jan 2023 Last revised: 14 Apr 2023

See all articles by Benjamin Bennett

Benjamin Bennett

Tulane University - A.B. Freeman School of Business

René M. Stulz

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Zexi Wang

Lancaster University

Multiple version iconThere are 2 versions of this paper

Date Written: January 9, 2023

Abstract

Public attention to a firm may provide valuable monitoring, but it may also have a dark side by constraining management’s decisions and distracting it. We use inclusion in the S&P 500 index as a positive shock to public attention. Media coverage, Google searches, SEC downloads, SEC comment letters, shareholder proposals, analyst coverage, and lawsuits increase following inclusion. Post-inclusion performance falls and is negatively related to the increase in attention. Included firms’ investment and payout policies become more similar to those of index peers and the increase in similarity is positively related to the size of the attention increase.

Keywords: Public attention, S&P 500 index addition, analyst coverage, investment, dividends, share repurchases

JEL Classification: G24, G31, G32, G35

Suggested Citation

Bennett, Benjamin and Stulz, Rene M. and Wang, Zexi, Does Greater Public Scrutiny Hurt a Firm's Performance? (January 9, 2023). Fisher College of Business Working Paper No. 2023-03-001, Charles A. Dice Center Working Paper No. 2023-01, European Corporate Governance Institute – Finance Working Paper No. 873/2023, Available at SSRN: https://ssrn.com/abstract=4321191 or http://dx.doi.org/10.2139/ssrn.4321191

Benjamin Bennett

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

HOME PAGE: https://sites.google.com/site/benjaminbennettfinance/home

Rene M. Stulz (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

HOME PAGE: http://www.cob.ohio-state.edu/fin/faculty/stulz

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Zexi Wang

Lancaster University ( email )

Lancaster University Management School
Bailrigg
Lancaster, LA1 4YX
United Kingdom

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