Are CEOs More Informative than the CFOs? Empirical Evidence from Contrarian Beliefs and Superior Information

32 Pages Posted: 18 Mar 2015 Last revised: 19 Oct 2015

See all articles by Abu Zakir Md. Rasel Chowdhury

Abu Zakir Md. Rasel Chowdhury

Stockholm University

Sabur Mollah

Sheffield University Management School, University of Sheffield; Swansea Management School, Swansea University; Hull University Business School; Hull University Business School

Mir A. Zaman

University of Northern Iowa - Department of Finance

Date Written: January 5, 2015

Abstract

Informativeness of CEO and CFO trades gains ground in the academic literature. The existing research on CEO and CFO trades is unable to answer whether trades made by the CEOs and CFOs are based on the superior information or contrarian beliefs, especially in the category of opportunistic and routine trades. However, the driving forces behind the informativeness of the CEOs and CFOs are unexplored. By using a sample of 88,868 CEO and CFO trades from 2,271 firms for the period of 2004-2012, this paper reveals that CEOs’ opportunistic buy trades achieve greater cumulative abnormal returns than those of the CFOs, but CFOs utilize their financial expertise in rebalancing their portfolios by pursuing sale transactions, irrespective of the trade-type or trader-type, and hence, they outperform the CEOs. We show that the outperformance of the CEOs is predominantly for the superior information, but the outperformances of the CFOs reflect their financial expertise in rebalancing portfolios. We also find that contrarian beliefs lead to CEO and CFO sale transactions (routine and opportunistic), but superior information provokes opportunistic sale trades by CEOs and CFOs.

Keywords: Informativeness, CEO, CFO, Contrarian Beliefs, Superior Information, Opportunistic and Routine Trading

Suggested Citation

Rasel Chowdhury, Abu Zakir Md. and Mollah, Sabur and Zaman, Mir, Are CEOs More Informative than the CFOs? Empirical Evidence from Contrarian Beliefs and Superior Information (January 5, 2015). Available at SSRN: https://ssrn.com/abstract=2579293 or http://dx.doi.org/10.2139/ssrn.2579293

Abu Zakir Md. Rasel Chowdhury

Stockholm University ( email )

Kräftriket 3A
Stockholm Business School
Stockholm, --Select-- 106 91
Sweden

Sabur Mollah (Contact Author)

Sheffield University Management School, University of Sheffield ( email )

Conduit Road
Sheffield, Sheffield S10 1FL
United Kingdom

Swansea Management School, Swansea University ( email )

Singleton Park
Swansea, Wales SA2 8PP
United Kingdom

Hull University Business School ( email )

Cottingham Road
Hull, Great Britain HU6 7RX
United Kingdom

Hull University Business School ( email )

Cottingham Road
Hull, Hull HU6 7RX
United Kingdom

Mir Zaman

University of Northern Iowa - Department of Finance ( email )

Cedar Falls, IA 50614-0124
United States
319-273-2579 (Phone)
319-273-2922 (Fax)

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