Insider trading and CEO pay-gap induced turnover

Article


Le, V., Nguyen, A., Gregoriou, A. and Forbes, W. 2024. Insider trading and CEO pay-gap induced turnover. Journal of Risk and Financial Management. 17 (11). https://doi.org/10.3390/jrfm17110483
TypeArticle
TitleInsider trading and CEO pay-gap induced turnover
AuthorsLe, V., Nguyen, A., Gregoriou, A. and Forbes, W.
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.

Keywordsinsider abnormal returns; CEO pay-gap induced turnover; CEO entrenchment
Sustainable Development Goals10 Reduced inequalities
Middlesex University ThemeSustainability
PublisherMDPI
JournalJournal of Risk and Financial Management
ISSN
Electronic1911-8074
Publication dates
Online27 Oct 2024
PrintNov 2024
Publication process dates
Submitted19 Sep 2024
Accepted21 Oct 2024
Deposited05 Nov 2024
Output statusPublished
Publisher's version
License
File Access Level
Open
Copyright Statement

© 2024 by the authors. Licensee MDPI, Basel, Switzerland. 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/).

Digital Object Identifier (DOI)https://doi.org/10.3390/jrfm17110483
LanguageEnglish
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