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In law we trust: Lawyer CEOs and stock liquidity

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  • Pham, Mia Hang

Abstract

I find that about 8.5% of firms in the sample of S&P 1500 firms are run by CEOs with a law degree (lawyer CEOs) and these firms have higher stock market liquidity than non-lawyer run CEO firms. I also find stock market liquidity improves following the appointment of lawyer CEOs. Lawyer CEOs improve stock market liquidity because they improve the firm’s information environment and reduce firm risk. Firms led by CEOs with legal expertise are associated with less stock price delay, weaker market reactions to corporate earnings announcements, and lower insider trading profits. Overall, this paper highlights the importance of CEO characteristics in enhancing financial market quality.

Suggested Citation

  • Pham, Mia Hang, 2020. "In law we trust: Lawyer CEOs and stock liquidity," Journal of Financial Markets, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:finmar:v:50:y:2020:i:c:s1386418120300173
    DOI: 10.1016/j.finmar.2020.100548
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    More about this item

    Keywords

    Stock market liquidity; CEOs; Legal education; Insider trading;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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