Working Paper: CEPR ID: DP10144
Authors: Alex Edmans; Luis Goncalves-Pinto; Yanbo Wang; Moqi Xu
Abstract: We show that CEOs strategically time corporate news releases to coincide with months in which their equity vests. These vesting months are determined by equity grants made several years prior, and thus unlikely driven by the current information environment. CEOs reallocate news into vesting months, and away from prior and subsequent months. They release 5% more discretionary news in vesting months than prior months, but there is no difference for non-discretionary news. These news releases lead to favourable media coverage, suggesting they are positive in tone. They also generate a temporary run-up in stock prices and market liquidity, potentially resulting from increased investor attention or reduced information asymmetry. The CEO takes advantage of these effects by cashing out shortly after the news releases.
Keywords: CEO incentives; equity vesting; news; voluntary disclosure
JEL Codes: G14; G34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Equity vesting (G12) | CEO share sales (M12) |
| Equity vesting (G12) | Discretionary news releases (G14) |
| Discretionary news releases (G14) | Positive media coverage (L82) |
| Discretionary news releases (G14) | Stock price run-up (G19) |
| Equity vesting (G12) | Trading volume increase (G19) |
| Equity vesting (G12) | Reduced information asymmetry (D82) |