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Are CFOs’ Trades More Informative than CEOs’ Trades?Weimin WangSaint Louis University Yong-Chul ShinUniversity of Massachusetts at Boston - Department of Accounting and Finance Bill B. FrancisRensselaer Polytechnic Institute (RPI) - Lally School of Management March 15, 2011 Journal of Financial and Quantitative Analysis (JFQA), Forthcoming Abstract: We investigate whether trades made by CFOs reveal more information about future stock returns than those by CEOs. We find that CFOs earn statistically and economically higher abnormal returns following their purchases of company shares than CEOs. During 1992-2002, CFOs earned an average 12-month excess return that is 5% higher than that by CEOs. The superior performance by CFOs occurs notwithstanding controls for risk factors, and persists even after their trades are publicly disclosed. Further analysis shows that CFO purchases are associated with more positive future earnings surprises than CEO purchases, suggesting that CFOs incorporate better information about future earnings.
Number of Pages in PDF File: 38 Keywords: insider trade, CFO, CEO JEL Classification: G14 Accepted Paper SeriesDate posted: March 19, 2011 ; Last revised: March 25, 2011Suggested CitationContact Information
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