Managers' and Investors' Responses to Media Exposure of Board Ineffectiveness
50 Pages Posted: 6 May 2005
Date Written: September 2007
We analyze the impact of the press on the behavior of various economic agents by examining how media exposure of board ineffectiveness affects corporate governance, investor trading behavior, and security prices. The results suggest that media releases of (noisy) information have significant economic consequences. In particular, media exposure of board ineffectiveness forces the targeted agents to take corrective actions and enhances shareholder wealth. Individual investors appear to react negatively to the media exposure whereas investment firms act as if they anticipate the targeted firms' corrective actions.
Keywords: corporate governance, investor trading behavior, media, public exposure
JEL Classification: G34, G14, G12
Suggested Citation: Suggested Citation