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Does Greater Public Scrutiny Hurt a Firm's Performance?

Author

Listed:
  • Bennett, Benjamin

    (Tulane U)

  • Stulz, Rene M.

    (Ohio State U and ECGI, Brussels)

  • Wang, Zexi

    (Lancaster U)

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.

Suggested Citation

  • Bennett, Benjamin & Stulz, Rene M. & Wang, Zexi, 2023. "Does Greater Public Scrutiny Hurt a Firm's Performance?," Working Paper Series 2023-01, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    • Handle: RePEc:ecl:ohidic:2023-01
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    More about this item

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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