Abstract
We explore how insider trading returns, disparities in executive pay, and CEO turnover are interrelated. Our findings reveal both independent and interactive effects for insider trading returns, the CEO pay gap, and the likelihood of CEO turnover. First, an increase in abnormal returns from insider purchases lowers the probability of a CEO’s turnover, while an increase in abnormal returns from insider sales increases the likelihood of a CEO’s dismissal. Second, the CEO pay gap negatively affects the probability of CEO turnover for insider purchases, but it does not have a similar effect on insider sales. Third, the interaction between insider abnormal returns and any CEO pay disparity influences the impact of these returns on CEO turnover. Specifically, this interaction diminishes the positive effect of insider selling on the probability of a CEO’s dismissal, offsets the negative effect of insider purchasing on CEO dismissal, and, finally, amplifies the negative impact of CEO pay disparity on the probability of a CEO’s dismissal during periods witnessing insider purchases.
| Original language | English |
|---|---|
| Article number | 483 |
| Number of pages | 24 |
| Journal | Journal of Risk and Financial Management |
| Volume | 17 |
| Issue number | 11 |
| DOIs | |
| Publication status | Published - 27 Oct 2024 |
Bibliographical note
This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/licenses/by/4.0/).Keywords
- insider abnormal returns
- CEO pay-gap induced turnover
- CEO entrenchment