Holding On For Good Times: The Information Content of the CEO's Voluntary Equity Exposure
Chinese University of Hong Kong (CUHK) - Department of Finance
University of Miami
Hong Kong University of Science and Technology
September 5, 2012
We present a novel idea for extracting information about future stock performance from the level of equity exposure of the CEO that is not conveyed by her purchases and sales. A high level of equity exposure, when it reflects the CEO’s own choice, is associated with 5% to 9% positive abnormal returns over the next year. This relation holds after controlling for purchases by the CEO and is stronger for firms where she has a greater information advantage. We rule out possible alternative explanations based on unobserved firm characteristics, missing risk factors, and incentive of the CEO to exert effort.
Number of Pages in PDF File: 54
Keywords: CEO stock holding, insider trading
JEL Classification: G11, G12, G14working papers series
Date posted: March 19, 2011 ; Last revised: September 6, 2012
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