Journal of Financial and Quantitative Analysis

Research Articles

Are CFOs’ Trades More Informative Than CEOs’ Trades?

Weimin Wanga1, Yong-Chul Shina2 and Bill B. Francisa3

a1, Cook School of Business, Saint Louis University, 3674 Lindell Blvd, St. Louis, MO 63108

a2, College of Management, University of Massachusetts Boston, 100 Morrissey Blvd, Boston, MA 02125

a3, Lally School of Management and Technology, Rensselaer Polytechnic Institute, 110 8th St, Troy, NY 12180


We investigate whether trades made by chief financial officers (CFOs) reveal more information about future stock returns than those by chief executive officers (CEOs). We find that CFOs earn statistically and economically higher abnormal returns following their purchases of company shares than CEOs. During 1992–2002, CFOs earned an average 12-month excess return that is 5% higher than that by CEOs. The superior performance by CFOs occurs notwithstanding controls for risk factors and persists even after their trades are publicly disclosed. Further analysis shows that CFO purchases are associated with more positive future earnings surprises than CEO purchases, suggesting that CFOs incorporate better information about future earnings.


  We thank Hendrik Bessembinder (the editor), Donald Cram, Zhaoyang Gu, Dirk Jenter (the referee), Ananth Seetharaman, and seminar participants at Loyola University Chicago, University of Massachusetts Boston, University of San Francisco, the 2008 American Accounting Association (AAA) Annual Meeting, and the 2008 AAA Northeast Regional Meeting for valuable comments and suggestions.