Network Centrality, Connections, and Social Capital: Evidence from CEO Insider Trading Gains

59 Pages Posted: 24 Sep 2019 Last revised: 2 Nov 2020

See all articles by Rwan El-Khatib

Rwan El-Khatib

Zayed University

Dobrina Georgieva Jandik

University of Arkansas

Tomas Jandik

University of Arkansas - Sam M. Walton College of Business

Date Written: October 31, 2020

Abstract

CEO’s insider trading gains are affected by the position of the CEO within the hierarchy of all executives, as assessed by network centrality. CEOs with high centrality earn superior abnormal returns following their company’s stock purchases, consistent with social capital advantage. Social capital and trading gains are positively associated primarily in firms that are riskier, have weak governance, or are managed by CEOs with no background in finance. High centrality CEOs also gain by selling their shares prior to a bad news event experienced by their firm. Finally, trading gains are positively affected by CEOs having past connections to the CFOs.

Keywords: Network Centrality, Insider Trading, Social Networks, Social Capital

JEL Classification: G14, L14, G30

Suggested Citation

El-Khatib, Rwan and Jandik, Dobrina Georgieva and Jandik, Tomas, Network Centrality, Connections, and Social Capital: Evidence from CEO Insider Trading Gains (October 31, 2020). Available at SSRN: https://ssrn.com/abstract=3453835 or http://dx.doi.org/10.2139/ssrn.3453835

Rwan El-Khatib

Zayed University

P.O. Box 4783
Abu Dhabi
United Arab Emirates

Dobrina Georgieva Jandik

University of Arkansas ( email )

Fayetteville, AR 72701
United States

Tomas Jandik (Contact Author)

University of Arkansas - Sam M. Walton College of Business ( email )

WCOB 302
Fayetteville, AR 72701
United States
479-575-6147 (Phone)

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