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Network centrality, connections, and social capital: Evidence from CEO insider trading gains
Author(s) -
ElKhatib Rwan,
Jandik Dobrina,
Jandik Tomas
Publication year - 2021
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/fire.12260
Subject(s) - centrality , business , insider , chief executive officer , corporate governance , embeddedness , insider trading , social capital , position (finance) , monetary economics , finance , economics , management , social science , mathematics , combinatorics , sociology , political science , anthropology , law
Chief executive officer's (CEO's) insider trading gains are affected by the position of the CEO within the hierarchy of all executives, as assessed by network centrality. CEOs with high centrality earn superior abnormal returns following their company's stock purchases, consistent with social capital advantage. Social capital and trading gains are positively associated primarily in firms that are riskier, have weak governance, or are managed by CEOs with no background in finance. High‐centrality CEOs also gain by selling their shares prior to a bad news event experienced by their firm. Finally, trading gains are positively affected by CEOs having past connections to the chief financial officers.