In the light of the large number of signals found empirically to predict firms’ stock returns, some researchers in this field speak of data mining. To avoid this, newly proposed so-called return predicting signals should be based on a theoretical foundation. Building on research on identity and entrepreneurial orientation, I propose that firm status (i.e., “founder CEO” and “family” firms) is a viable signal that predicts part of firms’ stock returns. My results suggest that a “founder CEO firm” indicator has predictive value for explaining part of the cross-section of stock returns while controlling for established risk factors, whereas a “family firm” indicator does not. Additionally, the performance of a risk factor created from a “founder CEO firm” indicator cannot be explained by the common risk factors currently used. Finally, the results from a mean-variance spanning test suggest that it would be beneficial to include a “founder CEO firm” risk factor in the set of common risk factors currently established in the asset pricing literature. My results have several implications for both research and practice.     «

In the light of the large number of signals found empirically to predict firms’ stock returns, some researchers in this field speak of data mining. To avoid this, newly proposed so-called return predicting signals should be based on a theoretical foundation. Building on research on identity and entrepreneurial orientation, I propose that firm status (i.e., “founder CEO” and “family” firms) is a viable signal that predicts part of firms’ stock returns. My results suggest that a “founder CEO firm”...     »