The curse of the business press

Paul Brown of the New York Times writes Saturday that executives who are called the “best manager” or the “best performing” in the business media often see their stock price fall, according to a Cal-Berkeley/UCLA study.

Brown wrote, “‘The stock market returns of award-winning C.E.O.s’ companies lagged those of their unheralded peers by about 4 percent per year over the three years following an award,’ Larry Yu writes in Sloan Management Review in summarizing the research.

“What causes the decline? The academics speculate that recognition in the press could lead to the executive’s becoming distracted. ‘Winning an award doubles the odds of the C.E.O. penning a book, and winning as many as five awards makes a C.E.O. four times as likely to sit on five or more outside boards.’

“Or it could be that as Ms. Malmendier notes, journalists are simply very good at picking people who are going to underperform.”

Read more here.