By focusing on coverage of the CEO, rather than their company, the study discovered that businesses with the highest level of CEO media coverage outperformed in value those with the lowest by eight per cent.
Furthermore, CEO’s with positive coverage only helped boost outperformance of those with the lowest by seven per cent, highlighting the value of aggregate coverage rather than positive coverage.
Bang Dang Nguyen, university lecturer in finance and director of the MPhil in Finance Programme at Cambridge Judge, commented: “We live in a world of incomplete information, and the study shows that additional coverage of a company’s CEO helps fill that information gap for investors, and this contributes to additional valuation.”
CEOs are often seen as not only the public face of the company, but also its “embodiment” in the eyes of investors and the boarder public.
Enigmatic chief executives who have secured valuable column inches for their companies include Elon Musk, who is arguably better known than his company, Tesla, and media mogul Rupert Murdoch.
Ryanair chief Michael O’Leary, Uber CEO Travis Kalanick and Oracle’s Larry Ellison have all shown that making controversial comments in the media does little to deter investors from wanting to become involved with their companies.
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The study also suggested that greater news coverage helps a CEO in terms of “rent extraction” – increased total compensation – that is 4.1 per cent above and beyond what they obtain from the increase in firm value that arises due to media coverage.
By sampling Fortune 500 CEOs, it was found that the average company head was mentioned in 57 news stories in a year – with only 13 of them positive.
“Because of incomplete information, investors rely at least partially on public information to make decisions,” the study declared. “Media coverage may help in removing some uncertainty, bringing in more transparency, adding credibility, and highlighting the viability of future projects.”
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