Geography and CEO Luck: Where Do CEOs Tend to be Lucky?

July 20, 2013 Leave a comment

Geography and CEO Luck: Where Do CEOs Tend to be Lucky?

Pandej Chintrakarn Mahidol University International College (MUIC)

Napatsorn Jiraporn State University of New York at New Paltz

Pornsit Jiraporn Pennsylvania State University – SGPS; National Institute of Development Administration (NIDA), Mahidol University, College of Management (CMMU), Bangkok, Thailand

July 10, 2013

Abstract: 
CEOs are “lucky” when they receive stock option grants on days when the stock price is the lowest in the month of the grant, implying opportunistic timing (Bebchuk, Grinstein, and Peyer, 2010). We extend Bebchuk et al. (2010) by investigating the geographic peer effects of CEO luck. Our evidence shows that a CEO is significantly more likely to be lucky when other CEOs in the surrounding area are not lucky. It appears that a CEO tends to practice opportunistic timing of option grants when such a practice is less prevalent and thus less noticeable in the nearby area, probably in order to avoid detection. We estimate that the marginal geographic effect on a given CEO’s luck is 18.36%, which is both statistically and economically significant. Our results suggest that regulators should look for corporate opportunistic behavior where it is not expected.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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