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Institutional Trading, Information Production, and Forced CEO Turnovers

Journal of Corporate Finance, 2021

56 Pages Posted: 15 Aug 2013 Last revised: 9 Sep 2021

See all articles by Thomas J. Chemmanur

Thomas J. Chemmanur

Boston College - Carroll School of Management

Gang Hu

Hong Kong Polytechnic University - School of Accounting and Finance

Yingzhen Li

The Brattle Group; Boston College - Department of Finance

Jing Xie

University of Macau, Faculty of Business Administration, Department of Finance and Business Economics

Date Written: January 6, 2021

Abstract

We analyze transaction-level data on institutional trading and examine information flows around CEO turnovers. We find that institutional trading prior to a CEO turnover is positively related to the nature of a CEO turnover (forced versus voluntary). We further find that institutions produce information partly by analyzing insider trading prior to a CEO turnover, though they are able to produce additional information independently as well. Finally, we find that trading by institutions after a forced CEO turnover with an insider as successor CEO is positively related to subsequent long-run stock returns, and realizes significant abnormal trading profits. Overall, our results are consistent with the notion that information production by institutions, and their trading making use of this information, improves the information environment around CEO turnovers.

Keywords: Corporate Governance; CEO Turnover; Institutional Trading; Information Production

JEL Classification: G23, G34

Suggested Citation

Chemmanur, Thomas J. and Hu, Gang and Li, Yingzhen and Xie, Jing, Institutional Trading, Information Production, and Forced CEO Turnovers (January 6, 2021). Journal of Corporate Finance, 2021, Available at SSRN: https://ssrn.com/abstract=2309717 or http://dx.doi.org/10.2139/ssrn.2309717

Thomas J. Chemmanur (Contact Author)

Boston College - Carroll School of Management ( email )

Finance Department, 436 Fulton Hall
Carroll School of Management, Boston College
Chestnut Hill, MA 02467-3808
United States
617-552-3980 (Phone)
617-552-0431 (Fax)

HOME PAGE: http://https://www2.bc.edu/thomas-chemmanur/

Gang Hu

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

M1038, Li Ka Shing Tower
Hung Hom, Kowloon
Hong Kong
(852) 3400 8455 (Phone)

HOME PAGE: http://ganghu.org

Yingzhen Li

The Brattle Group ( email )

1800 M St NW
#700
Washington, DC 20036
United States

Boston College - Department of Finance ( email )

United States

Jing Xie

University of Macau, Faculty of Business Administration, Department of Finance and Business Economics ( email )

E22-4064, FBA building
Macau
Macau, 000000
China
+853 88224639 (Phone)

HOME PAGE: http://fba.um.edu.mo/faculty/jingxie/

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