Does Stardom Affect the Informativeness of a CEO'S Insider Trades?
30 Pages Posted: 27 May 2020
Date Written: October/November 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: chief executive officer, insider trading, opportunistic trade, routine trade, star
JEL Classification: G14, G23, G29
Suggested Citation: Suggested Citation