Early career experience of executives and stock price informativeness

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.