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

Pandej Chintrakarn, Pornsit Jiraporn and Napatsorn Jiraporn

Finance Research Letters, 2014, vol. 11, issue 3, 289-294

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.

Keywords: Option backdating; CEO luck; Lucky CEOs; Informativeness; Idiosyncratic volatility; Transparency (search for similar items in EconPapers)
JEL-codes: G30 G34 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:11:y:2014:i:3:p:289-294

DOI: 10.1016/j.frl.2013.11.006

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