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Network centrality, connections, and social capital: Evidence from CEO insider trading gains

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  • Rwan El‐Khatib
  • Dobrina Jandik
  • Tomas Jandik

Abstract

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.

Suggested Citation

  • Rwan El‐Khatib & Dobrina Jandik & Tomas Jandik, 2021. "Network centrality, connections, and social capital: Evidence from CEO insider trading gains," The Financial Review, Eastern Finance Association, vol. 56(3), pages 433-457, August.
    • Handle: RePEc:bla:finrev:v:56:y:2021:i:3:p:433-457
    DOI: 10.1111/fire.12260
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    3. Luo, Ronghua & Zhao, Senyang & Zhou, Jing, 2023. "Information network, public disclosure and asset prices," Pacific-Basin Finance Journal, Elsevier, vol. 77(C).
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    5. Suin Lee & Christos Pantzalis & Jung Chul Park, 2024. "Interstate migration‐based social networks and M&A decisions," The Financial Review, Eastern Finance Association, vol. 59(1), pages 113-153, February.

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