Are CFOs’ Trades More Informative than CEOs’ Trades?
Saint Louis University
University of Massachusetts Boston
Bill B. Francis
Rensselaer Polytechnic Institute (RPI) - Lally School of Management
March 15, 2011
Journal of Financial and Quantitative Analysis (JFQA), Forthcoming
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
Date posted: March 19, 2011 ; Last revised: March 25, 2011