Does Stardom Affect the Informativeness of a CEO’s Insider Trades?
Forthcoming, Journal of Business Finance and Accounting
54 Pages Posted: 23 Oct 2019
Date Written: October 9, 2019
This study examines whether the celebrity or star status of a chief executive officer (CEO) affects the informativeness of his insider trades. Using three different measures to identify star CEOs in a sample of S&P 1500 firms, we find that trades of non-star CEOs predict future abnormal returns and earnings innovations and that trades of star CEOs do not. The predictive power of non-star CEO trades is mostly attributable to opportunistic trades, not routine trades. We also find evidence suggesting that the abnormal returns associated with non-star CEO insider trades are due to the lower visibility and consequently less scrutiny of non-star CEOs compared with star CEOs.
Keywords: star, chief executive officer, insider trading, opportunistic trade, routine trade
JEL Classification: G14, G23, G29
Suggested Citation: Suggested Citation