CEO ownership and stock market performance : evidence from the Stock Exchange of Thailand and Market for Alternative Investment

Abstract

This study examines the relationship between CEO ownership and stock market performance in the Stock Exchange of Thailand and Market for Alternative Investment during 2003-2014. The study provides evidence that a strategy of going long in firms with significant CEO ownership produces positive abnormal returns. Furthermore, the study goes on to incorporate corporate governance and shows that going long in firms with a high Thai Institute of Directors (IOD) ranking also produces positive abnormal returns while the opposite holds true for firms with a low IOD ranking. Lastly, the study suggests that CEO ownership can reverse the negative impact of weak governance as going long in firms with a low IOD ranking but significant CEO ownership results in higher returns than going long in a portfolio where the only criteria is a low IOD ranking. Corporate governance matters in asset pricing and significant ownership is an added incentive for the CEO to add value to the company, which the market does not correctly price.