CEO Trade Timing and Managerial Talent
41 Pages Posted: 8 Dec 2008 Last revised: 23 Feb 2018
Date Written: February 19, 2018
The paper finds that CEOs time their trades in their own company’s stock better than the average investor. While this could suggest that CEOs take advantage of their access to nonpublic information at the shareholders’ expense, trade timing can be a desirable CEO characteristic for investors if it reflects CEOs’ overall ability and is therefore associated with managerial talent. We find that CEOs who time their trades better than their peers demonstrate superior performance in running their firms, are employed by companies with better corporate governance, receive greater compensation, and have longer tenure with their firms. Overall, CEO trade timing is an observable characteristic that can be used by investors and corporate boards to identify talented managers.
Keywords: CEO Talent; Executive Compensation; Governance; Insider Trading; Trade Timing
JEL Classification: G11; G14
Suggested Citation: Suggested Citation