Insider Trading before Earnings News: The Role of Executive Pay Disparity

Ann-Ngoc Nguyen, Viet Le, Andros Gregoriou, David Kernohan

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Abstract

We investigate how executive pay disparity affects insider profits around earnings news. Our findings reveal that high pay disparity is linked to higher abnormal returns from insider purchases before positive news, suggesting insiders exploit good news for greater gains. Conversely, it is associated with lower abnormal returns from insider sales before negative news, indicating less benefit from such sales. These insights highlight the influence of pay disparity on insider trading and underscore the importance of understanding this dynamic to improve decision-making and reduce misuse of insider information.
Original languageEnglish
Article number453
Number of pages36
JournalJournal of Risk and Financial Management
Volume17
Issue number10
DOIs
Publication statusPublished - 6 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 gains
  • CEO pay gap
  • CEO pay slice
  • earnings disclosure
  • good news
  • bad news

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