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Managerial political orientation and insider trading

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  • Wei Li
  • Yunyan Zhang

Abstract

In this study, we examine how the personal ideology of chief executive officers (CEOs), as proxied by their political preferences, influences their insider‐trading choices. We expect and find that, relative to Democratic‐leaning CEOs, the conservative ideology of Republican‐leaning CEOs leads them to refrain more from informed insider trading to avoid costly litigation. Using an exogenous change in litigation environment, we find that Republican CEOs increase informed trading when facing a sudden relaxation of litigation risk, suggesting that the fear of litigation cost is the underlying mechanism of the observed relation. Our findings are robust to different model specifications.

Suggested Citation

  • Wei Li & Yunyan Zhang, 2022. "Managerial political orientation and insider trading," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(1), pages 513-545, March.
    • Handle: RePEc:bla:acctfi:v:62:y:2022:i:1:p:513-545
    DOI: 10.1111/acfi.12797
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