The Effect of CEO Luck on the Informativeness of Stock Prices: Do Lucky CEOS Improve Stock Price Informativeness?

17 Pages Posted: 17 Nov 2013

See all articles by Pandej Chintrakarn

Pandej Chintrakarn

Mahidol University International College (MUIC)

Pornsit Jiraporn

Pennsylvania State University - School of Graduate Professional Studies (SGPS)

Napatsorn Jiraporn

State University of New York at New Paltz

Date Written: November 16, 2013

Abstract

CEOs are “lucky” when they are granted stock options on days when the stock price is lowest in the month of the grant, implying opportunistic timing and severe agency problems (Bebchuck, Grinstein, and Peyer, 2010). Using idiosyncratic volatility as our measure of stock price informativeness, we find that lucky CEOs improve the informativeness of stock prices significantly. In particular, CEO luck raises the degree of informativeness by 4.39%. Powerful CEOs who can circumvent governance mechanisms and successfully practice opportunistic timing of options grants are so secured in their positions that they have fewer incentives to conceal information, thereby improving informativeness.

Keywords: option backdating, CEO luck, lucky CEOs, informativeness, idiosyncratic volatility, transparency, information asymmetry

JEL Classification: G30, G34

Suggested Citation

Chintrakarn, Pandej and Jiraporn, Pornsit and Jiraporn, Napatsorn, The Effect of CEO Luck on the Informativeness of Stock Prices: Do Lucky CEOS Improve Stock Price Informativeness? (November 16, 2013). Available at SSRN: https://ssrn.com/abstract=2355828 or http://dx.doi.org/10.2139/ssrn.2355828

Pandej Chintrakarn

Mahidol University International College (MUIC) ( email )

999 Buddhamonthon 4 Road
Salaya, Nakhonpathom, 73170
Thailand
66 (0) 2441 5090 (Phone)
66 (0) 2441 9745 (Fax)

Pornsit Jiraporn (Contact Author)

Pennsylvania State University - School of Graduate Professional Studies (SGPS) ( email )

30 E. Swedesford Road
Malvern, PA 19355
United States
(484) 753-3655 (Phone)

HOME PAGE: http://www.personal.psu.edu/pxj11/index1.html

Napatsorn Jiraporn

State University of New York at New Paltz ( email )

1 Hawk Drive
600 Hawk Drive
New Paltz, NY 12561-2443
United States

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