Managerial Trustworthiness and Buybacks

Sterling Huang, Kaisa Snellman, and Theo Vermaelen

CEO trustworthiness is positively related to long-term excess returns after buyback announcements. CEO trustworthiness is initially measured by the extent to which people in the county where the company headquarters is located trust each other. Further, the positive impact of trustworthiness on excess returns is higher when the CEO has been a long term resident of a high trust county, and correspondingly, trustworthy CEOs are less likely to be accused of financial misreporting. Our conclusions are confirmed when we use alternative measures of trustworthiness such as employee trust and CEO integrity.