What Motivates CEO and CFO Trading – Contrarian Beliefs or Superior Information?

33 Pages Posted: 16 Nov 2016

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: November 13, 2016

Abstract

In this paper we investigate whether trading by CEOs and CFOs is motivated by contrarian beliefs or superior information about future cash flow realizations. We find that even though both CEOs and CFOs earn significant abnormal returns following their trades, CFO trades are associated with higher abnormal returns than CEO trades. Initial analysis suggests that these abnormal returns are related to both contrarian beliefs and superior information about future cash flow realizations. However, when we analyze the trading behavior in terms of routine trading and opportunistic trading, we find that both CEOs and CFOs earn abnormal returns from opportunistic trading and these trades are motivated solely by contrarian beliefs.

Keywords: Insider Trading; CEO; CFO; Contrarian Beliefs; Superior Information; Opportunistic and Routine Trading

JEL Classification: G14

Suggested Citation

Rasel Chowdhury, Abu Zakir Md. and Mollah, Sabur and Zaman, Mir, What Motivates CEO and CFO Trading – Contrarian Beliefs or Superior Information? (November 13, 2016). Available at SSRN: https://ssrn.com/abstract=2868762 or http://dx.doi.org/10.2139/ssrn.2868762

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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