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Strategic News Releases in Equity Vesting Months

49 Pages Posted: 15 Sep 2014  

Alex Edmans

London Business School - Institute of Finance and Accounting; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Luis Goncalves-Pinto

Chinese University of Hong Kong - Department of Finance

Yanbo Wang

Sungkyunkwan University; INSEAD

Moqi Groen-Xu

London School of Economics & Political Science (LSE)

Multiple version iconThere are 3 versions of this paper

Date Written: September 2014

Abstract

We show that CEOs strategically time corporate news releases to coincide with months in which their equity vests. These vesting months are determined by equity grants made several years prior, and thus unlikely driven by the current information environment. CEOs reallocate news into vesting months, and away from prior and subsequent months. They release 5% more discretionary news in vesting months than prior months, but there is no difference for non-discretionary news. These news releases lead to favourable media coverage, suggesting they are positive in tone. They also generate a temporary run-up in stock prices and market liquidity, potentially resulting from increased investor attention or reduced information asymmetry. The CEO takes advantage of these effects by cashing out shortly after the news releases.

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Suggested Citation

Edmans, Alex and Goncalves-Pinto, Luis and Wang, Yanbo and Groen-Xu, Moqi, Strategic News Releases in Equity Vesting Months (September 2014). NBER Working Paper No. w20476. Available at SSRN: https://ssrn.com/abstract=2496233

Alex Edmans (Contact Author)

London Business School - Institute of Finance and Accounting ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Luis Goncalves-Pinto

Chinese University of Hong Kong - Department of Finance ( email )

Cheng Yu Tung Building
Shatin
Hong Kong
Hong Kong

Yanbo Wang

Sungkyunkwan University ( email )

53 Myeongnyun-dong 3-ga Jongno-ju
Guro-gu
Seoul, 110-745
Korea, Republic of (South Korea)

INSEAD ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France

Moqi Groen-Xu

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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