The effect of CEO luck on the informativeness of stock prices: Do lucky CEOs improve stock price informativeness?

Pandej Chintrakarn, Pornsit Jiraporn, Napatsorn Jiraporn

Research output: Contribution to journalArticle

Abstract

CEOs are “lucky“ when they are granted stock options on days when the stock price is lowest in the month of the grant, implying opportunistic timing and severe agency problems (Bebchuk et al., 2010). Using idiosyncratic volatility as our measure of stock price informativeness, we find that lucky CEOs improve the informativeness of stock prices significantly. In particular, CEO luck raises the degree of informativeness by 4.39%. Powerful CEOs who can circumvent governance mechanisms and successfully practice opportunistic timing of options grants are so secured in their positions that they have fewer incentives to conceal information, thereby improving informativeness.

Original languageEnglish (US)
Pages (from-to)289-294
Number of pages6
JournalFinance Research Letters
Volume11
Issue number3
DOIs
StatePublished - Sep 1 2014

Fingerprint

Price informativeness
Luck
Stock prices
Chief executive officer
Informativeness
Idiosyncratic volatility
Incentives
Agency problems
Stock options
Governance mechanisms

All Science Journal Classification (ASJC) codes

  • Finance

Cite this

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The effect of CEO luck on the informativeness of stock prices : Do lucky CEOs improve stock price informativeness? / Chintrakarn, Pandej; Jiraporn, Pornsit; Jiraporn, Napatsorn.

In: Finance Research Letters, Vol. 11, No. 3, 01.09.2014, p. 289-294.

Research output: Contribution to journalArticle

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