Knowing Me, Knowing You? Similarity to the CEO and Fund Managers' Investment Decisions

Stefan Jaspersen and Peter Limbach

VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy from Verein für Socialpolitik / German Economic Association

Abstract: This study provides evidence that investors’ demographic similarity to CEOs affects their investment decisions. We find that mutual fund managers overweight firms led by CEOs who resemble them in terms of age, ethnicity and gender. This finding is robust to excluding educational and local ties and is supported by variation in similarity caused by CEO departures. Investing in firms run by similar CEOs, on average, is associated with superior performance and is more pronounced when CEOs have more impact on their firms. Results suggest that demographic similarity to CEOs facilitates informed trading, implying that investors’ information production incorporates firm management.

Keywords: CEO-investor similarity; familiarity bias; information advantages; investment decisions; mutual fund performance (search for similar items in EconPapers)
JEL-codes: G11 G23 J10 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-cfn, nep-hrm and nep-soc
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc18:181501

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