DP10144 Strategic News Releases in Equity Vesting Months

Author(s): Alex Edmans, Luis Goncalves-Pinto, Moqi Groen-Xu, Yanbo Wang
Publication Date: September 2014
Keyword(s): CEO Incentives, Equity Vesting, News., Voluntary Disclosure
JEL(s): G14, G34
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=10144

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.