 Does regulating executive compensation impact insider trading?Yanyan Chen, Gary Gang Tian and Daifei Troy Yao Pacific-Basin Finance Journal, 2019, vol. 56, issue C, 1-20 Abstract: We examine whether equity incentive regulations help to reduce managerial incentives for manipulating earnings to gain trading advantages over shareholders. Using a sample of trading records for Chinese listed firms between 2006 and 2016, we find evidence that equity incentives reduce the positive association between insider trading and earnings management. In addition, we find that the impact of equity incentives on this association is more pronounced in state-owned enterprises (SOEs). Furthermore, we find that China's regulatory ban on the granting of equity to insiders with large shareholdings reduces the positive relation between insider selling and earnings management. Our additional tests provide strong evidence that regulatory requirements concerning the vesting conditions are negatively associated with managerial opportunistic behavior. Altogether, our results provide strong support for amendments to strengthen regulations on equity incentives in countries where overall corporate governance is weaker. Keywords: Regulation; Equity incentives; Insider trading; Earnings management (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:56:y:2019:i:c:p:1-20 DOI: 10.1016/j.pacfin.2019.05.004 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.