Information leaks before CEO change: financial gain and ethical cost
Journal of Communication Management
ISSN: 1363-254X
Article publication date: 23 March 2020
Issue publication date: 22 April 2020
Abstract
Purpose
The purpose of this paper is to investigate whether there are information leaks immediately before CEOs change and – if so – whether some investors take financial advantage of such prior knowledge. It thirdly investigates the ethical, practical and professional options for communication managers to deal with such situations.
Design/methodology/approach
Working from sentiment theory of financial markets, the authors studied Internet search patterns for incoming CEO names and stock market movements immediately prior to the public mention or speculation of CEO change.
Findings
The authors find that in nearly a quarter of CEO changes at Fortune 500 companies, the name of the future CEO seems to have been leaked. Additionally, nearly half of those companies also experience extreme, otherwise unexplainable movements in the stock market.
Originality/value
This paper discovers the prevalence of extreme stock market movements for a company when the name of that company's next CEO has likely been leaked. Such leaks are an opportunity for unscrupulous investors, but they create ethical dilemmas for organizations. Communication managers typically respond by organizing tighter governance. However, to keep up with the speed of information and investments traveling through algorithms, organizing radical transparency could become an alternative instead.
Keywords
Citation
Halff, G. and Gregory, A. (2020), "Information leaks before CEO change: financial gain and ethical cost", Journal of Communication Management, Vol. 24 No. 1, pp. 19-29. https://doi.org/10.1108/JCOM-09-2019-0126
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited