Insider trading before earnings news: the role of executive pay disparity

Article

Nguyen, A., Le, V., Kernohan, D. and Gregoriou, A. 2024. Insider trading before earnings news: the role of executive pay disparity. Journal of Risk and Financial Management. 17 (10). https://doi.org/10.3390/jrfm17100453
TypeArticle
TitleInsider trading before earnings news: the role of executive pay disparity
AuthorsNguyen, A., Le, V., Kernohan, D. and Gregoriou, A.
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.

KeywordsCEO pay gap; CEO pay slice; earnings disclosure; good news; bad news; insider trading
Sustainable Development Goals10 Reduced inequalities
16 Peace, justice and strong institutions
Middlesex University ThemeSustainability
PublisherMDPI AG
JournalJournal of Risk and Financial Management
ISSN1911-8066
Electronic1911-8074
Publication dates
Print06 Oct 2024
Print06 Oct 2024
Publication process dates
Submitted12 Aug 2024
Accepted27 Sep 2024
Deposited08 Oct 2024
Output statusPublished
Publisher's version
License
File Access Level
Open
Digital Object Identifier (DOI)https://doi.org/10.3390/jrfm17100453
LanguageEnglish
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