Read an interesting article from the Economist (5 May 2007) which I am only getting around to writing about now. Researchers decided to investigate whether business publication covers are good predictors of future performance. The researchers stated that there is anecdotal evidence that business editors are not the best at picking the companies to watch in terms of future performance. In all fairness to business magazines, it is hard to create new news when it takes time to pull a feature together and get it printed and distributed. The researchers looked at the cover headlines of BusinessWeek, Fortune and Forbes over 20 years (1983 to 2002) and measured whether the coverage was positive, negative or neutral. Researchers then looked at share price 24 months before the cover feature and 24 months following.
What did they learn? As the researchers hypothesized, positive feature stories followed extremely positive company performance and negative stories followed extremely negative performance. In both cases, the appearance on a cover of Business Week, Fortune, or Forbes signaled the end of the extreme performance. As the Economist puts it, “what matters is that if news is sufficiently good or bad to catapult a company onto a magazine cover, then it is already reflected in the share price.” So business magazines are not terribly helpful in signaling shifts in the market and in reputation.
Despite this finding and whether you find it surprising, the majority of cover headlines of these prominent business magazines were positive (64%). Far fewer were negative (18%) or neutral (18%). Forbes was the most positive (77%) followed by Fortune (64%) and BusinessWeek (54%). This fact surprised me because I always thought Fortune was the bible of big business and its biggest champion. Little did I know.
To all those reputation-watchers, enjoy the rest of the long weekend!
The Economist, Fortune, Forbes, BusinessWeek, share price, future performance, reputation, headlines, cover features, predicitive, coverage