Do co-opted boards increase insider profitability?
Rahman, Dewan; Malik, Ihtisham; Ali, Searat; Iqbal, Jamshed (2021-06-08)
Rahman, Dewan
Malik, Ihtisham
Ali, Searat
Iqbal, Jamshed
Elsevier
08.06.2021
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi-fe2022031623790
https://urn.fi/URN:NBN:fi-fe2022031623790
Kuvaus
vertaisarvioitu
© 2021 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
© 2021 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
Tiivistelmä
Using a sample of U.S. firms over the period 1996–2014, this paper examines whether insider trading profitability increases with high board co-option. Indeed, we find that firms with a higher level of co-opted directors exhibit higher insider trading profitability, largely due to a lower level of managerial ability and analyst coverage. Co-opted boards are also unlikely to implement self-imposed insider trading restrictions, exacerbating this relationship. This positive association is mitigated by a higher level of external monitoring by institutional investors and if the CEO receives more performance-based incentives. Overall, co-opted directors demonstrate aligned interests with CEOs and corporate insiders rather than performing their role as monitors. As a result, a more co-opted board is positively associated with exploitative behaviour of insiders.
Kokoelmat
- Artikkelit [3030]