Investors are star struck.
That’s the only conclusion I can draw from recent research by a group of academics who looked into the long-running trend of appointing celebrities as corporate directors.
Steve Ferris, a professor at the University of Missouri, and some other researchers, looked into whether naming well-known people to company boards had slowed because of supposed higher integrity standards today in corporate America.
Ferris said they started out with the question: “Why would anyone do this? It seems like a waste of a board seat.”
But then the group found that shares of companies benefited when they had board members like boxer Evander Holyfield, tennis great Billie Jean King, wide receiver Lynn Swann and — yes, way back when — even O.J. Simpson.
In fact, the researchers found that the “average abnormal return” — meaning, how much extra the stock rose based on a complex formula that I’d explain if I could — for the seven days after the announced appointment was a statistically significant 0.51 percent.
And the benefits, says Ferris, proved also to be longer term mainly because the “pure celebrity effect” increases publicity and name recognition for the companies involved.
In all, the researchers tracked 723 celebrity board appointments including politician Elizabeth Dole, whose pick helped Gateway Computer stock rise 13.66 percent in one day and actor Sidney Poitier, who contributed to a 4.24 percent rise in Disney’s stock the day his choice as a board member was announced.
“We were surprised when we found this,” Ferris told me. “We kind of scratched our heads.”
I’m scratching something else right now.
Do celebrities increase profits or revenues?
Do they come up with a wonderful new product like Post-its or Hot Pockets? Do they give out free autographs to shareholders and pose for pictures?
It has come to this.
If E-Trade had simply named Lindsay Lohan a director instead of mocking her in its incredibly cute baby commercials, the company might be booming right now.
OK, Lohan might be a bad example. But you get the point.
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You’ve heard about banks like Citigroup that are allegedly too big to fail. But one Midwest bank executive says people should be paying attention to another group of financial institutions — those that are too small for Washington to care about.
And this bank owner not only thinks these smallish institutions are being ignored, but that Washington is actually trying to put them out of business so that big money-center banks can divvy up the spoils.
“It’s disgusting,” said this exec, who I agreed not to identify because he was afraid of reprisals from Washington.
“I believe the Federal Reserve is controlled by the large banks and this is a way for big banks to pick up market share.”
This banker complains that federal bank auditors have been “hammering” community banks, which control 50 percent of the deposits in this country, through tougher rules on marking their loans to the actual market price — which, in the case of mortgages, means reducing the value of the loans.
Bigger banks, he believes, are being given wide discretion on similar loans. And large financial institutions, aside from receiving government bailouts, are also able to turn loans into marketable securities.
That’s something community banks aren’t allowed to do.
And because of the fa vorable treatment from Washington, this execu tive believes depositors are naturally going to gravitate to big banks, something he thinks is being orchestrated.
Even if all deposits are insured by the Federal Deposit Insurance Corporation, he explains, depositors are still not going to want to go through the inconvenience of a possible bank failure. john.crudele@nypost.com