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Insider Trading before Earnings News: The Role of Executive Pay Disparity

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  • Ann-Ngoc Nguyen

    (Department of Accounting, Finance, and Economics, Middlesex Business School, Middlesex University, The Burroughs, Hendon, London NW4 4BT, UK)

  • Viet Le

    (School of Economics, Finance, and Accounting, Coventry University, Coventry CV1 5DD, UK)

  • Andros Gregoriou

    (Liverpool Business School, Liverpool John Moores University, Brownlow Hill, Liverpool L3 5UG, UK)

  • David Kernohan

    (Department of Accounting, Finance, and Economics, Middlesex Business School, Middlesex University, The Burroughs, Hendon, London NW4 4BT, UK)

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.

Suggested Citation

  • Ann-Ngoc Nguyen & Viet Le & Andros Gregoriou & David Kernohan, 2024. "Insider Trading before Earnings News: The Role of Executive Pay Disparity," JRFM, MDPI, vol. 17(10), pages 1-36, October.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:10:p:453-:d:1493221
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    References listed on IDEAS

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