Does Greater Public Scrutiny Hurt a Firm's Performance?

76 Pages Posted: 23 Jan 2023 Last revised: 26 Apr 2023

See all articles by Benjamin Bennett

Benjamin Bennett

Tulane University - A.B. Freeman School of Business

René Stulz

Ohio State University (OSU) - Fisher College of Business

Zexi Wang

Lancaster University

Multiple version iconThere are 2 versions of this paper

Date Written: January 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.

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Suggested Citation

Bennett, Benjamin and Stulz, René and Wang, Zexi, Does Greater Public Scrutiny Hurt a Firm's Performance? (January 2023). NBER Working Paper No. w30858, Available at SSRN: https://ssrn.com/abstract=4334927 or http://dx.doi.org/10.2139/ssrn.4334927

Benjamin Bennett (Contact Author)

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

René Stulz

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

Zexi Wang

Lancaster University ( email )

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

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