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Early career experience of executives and stock price informativeness

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  • Jung, Sumi
  • Kwack, So Yean

Abstract

This paper examines the impact of early career experience through economic recessions of executives on stock price informativeness. We find that firms with a greater percentage of executives who start their careers during recessionary periods are positively associated with stock price informativeness, as measured by firm-specific stock return variation. Moreover, we document that the association is more pronounced for firms with poor external monitoring. These findings indicate that the early career experiences of executives significantly affect the extent to which stock prices convey firm-specific information, and that external monitoring and executives’ experiences during economic downturns exhibit a substitutive relationship. This paper points out the importance of considering the heterogeneous characteristic of executives to better understand corporate transparency.

Suggested Citation

  • Jung, Sumi & Kwack, So Yean, 2023. "Early career experience of executives and stock price informativeness," Economics Letters, Elsevier, vol. 232(C).
    • Handle: RePEc:eee:ecolet:v:232:y:2023:i:c:s0165176523003518
    DOI: 10.1016/j.econlet.2023.111326
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    References listed on IDEAS

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    1. Robert M. Bushman & Joseph D. Piotroski & Abbie J. Smith, 2004. "What Determines Corporate Transparency?," Journal of Accounting Research, Wiley Blackwell, vol. 42(2), pages 207-252, May.
    2. Viral V. Acharya & Stewart C. Myers & Raghuram G. Rajan, 2011. "The Internal Governance of Firms," Journal of Finance, American Finance Association, vol. 66(3), pages 689-720, June.
    3. Antoinette Schoar & Luo Zuo, 2017. "Shaped by Booms and Busts: How the Economy Impacts CEO Careers and Management Styles," The Review of Financial Studies, Society for Financial Studies, vol. 30(5), pages 1425-1456.
    4. Gul, Ferdinand A. & Srinidhi, Bin & Ng, Anthony C., 2011. "Does board gender diversity improve the informativeness of stock prices?," Journal of Accounting and Economics, Elsevier, vol. 51(3), pages 314-338, April.
    5. Ulrike Malmendier & Geoffrey Tate & Jon Yan, 2011. "Overconfidence and Early‐Life Experiences: The Effect of Managerial Traits on Corporate Financial Policies," Journal of Finance, American Finance Association, vol. 66(5), pages 1687-1733, October.
    6. Sila, Vathunyoo & Gonzalez, Angelica & Hagendorff, Jens, 2017. "Independent director reputation incentives and stock price informativeness," Journal of Corporate Finance, Elsevier, vol. 47(C), pages 219-235.
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    More about this item

    Keywords

    Stock price informativeness; Imprinting; Corporate transparency; Early career experience; Recession;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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