Abstract
This paper investigates the impact of insider trading and managerial attributes on future stock price crashes. We conduct a series of regressions addressing the managerial attributes determinants of future stock price crashes including gender diversity, CEO age, and CEO power (measured by CEO pay disparity, CEO tenure and CEO duality). Our empirical results reveal a positive association between insider purchases and price crash risk. This implies that other than compensation and career concerns, insiders hoard bad news to fulfil their trading incentives. Our positive coefficients of insider sales also suggest that insider sellers can assess inside information promptly and anticipate shortly before the crashes. We further document that the presence of female directors on boards can mitigate stock price crash risk. However, firms with powerful or younger Chief Executive Officers are more likely to experience crashes. Overall, we highlight the importance of corporate managerial attributes in dealing with information asymmetry problems.
| Original language | English |
|---|---|
| Pages (from-to) | 1378-1400 |
| Number of pages | 23 |
| Journal | International Journal of Finance & Economics |
| Volume | 29 |
| Issue number | 2 |
| Early online date | 24 Nov 2022 |
| DOIs | |
| Publication status | Published - Apr 2024 |
Bibliographical note
This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.Keywords
- CEO pay disparity
- gender diversity
- insider returns
- price crash risk
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