Insider trading and pay-performance sensitivity: An empirical analysis

Journal of Business Finance and Accounting

Volumn 32, Issue 9-10, 2005, Pages 1887-1919

  Zhang, Wei ^a,b,c   Cahan, Steven F ^a,b,c   Allen, Arthur C ^a,b,c  

^a CLARKSON UNIVERSITY   (United States)

^b UNIVERSITY OF AUCKLAND   (New Zealand)

^c UNIVERSITY OF NEBRASKA LINCOLN   (United States)

Author keywords

Compensation; Incentives; Insider trading; Pay performance sensitivity; Private information

Indexed keywords

EID: 29244449810     PISSN: 0306686X     EISSN: 14685957     Source Type: Journal    
DOI: 10.1111/j.0306-686X.2005.00651.x     Document Type: Article

References (36)

1. Adut, D., W.H. Cready and T.J. Lopez (2003), 'Restructuring Charges and CEO Cash Compensation: A Reexamination', Accounting Review, Vol. 78, pp. 169-92.
2. Aggarwal, R.K. and A.A. Samwick (1999), 'The Other Side of the Trade-Off: The Impact of Risk on Executive Compensation', Journal of Political Economy, Vol. 107, pp. 65-105.
3. Baiman, S. and R.E. Verrecchia (1995), 'Earnings arid Price-Based Compensation Contracts in the Presence of Discretionary Trading and Incomplete Contracting', Journal of Accounting and Economics, Vol. 20, pp. 93-121.
4. _ _ (1996), 'The Relation Among Capital Markets, Financial Disclosure, Production Efficiency, and Insider Trading', Journal of Accounting Research, Vol. 34, pp. 1-22.
5. Balsam, S. (1998), 'Discretionary Accounting Choices and CEO Compensation", Contemporary Accounting Research, Vol. 15, pp. 229-52.
6. Beneish, M.D. (1999), 'Incentives and Penalties Related to Earnings Overstatements That Violate GAAP', Accounting Review, Vol. 74, pp. 425-57.
7. _ and M.E. Vargus (2002), 'Insider Trading, Earnings Quality, and Accrual Mispricing', Accounting Review, Vol. 77, pp. 755-91.
8. Beny, L. (1999), 'A Comparative Empirical Investigation of the Agency and Market Theories of Insider Trading', Discussion Paper 264 (Harvard University).
9. Bettis, J.C., J.L. Coles and M.L. Lemmon (2000), "Corporate Policies Restricting Trading by Insiders', Journal of Financial Economics, Vol. 57, pp. 191-220.
10. Bushman, R.M. and R.J. Indjejikian (1993), 'Accounting Income, Stock Price, and Managerial Compensation', Journal of Accounting and Economics, Vol. 16, pp. 3-23.
11. Carlton, D.W. and D.R. Fischel (1983), 'The Regulation of Insider Trading', Stanford Law Review, Vol. 35, pp. 857-95.
12. Core, J., W. Guay and D. Larcker (2003), 'Executive Equity Compensation and Incentives: A Survey', Economic Policy Review - Federal Reserve Bank of New York, Vol. 9, pp. 27-50.
13. Dechow, P.M., M.R. Huson and R.G. Sloan (1994), 'The Effect of Restructuring Charges on Executives' Cash Compensation', Accounting Review, Vol. 69, pp. 138-56.
14. Demsetz, H. (1986), 'Corporate Control, Insider Trading, and Rates of Return', American Economic Review, Vol. 76, pp. 313-16.
15. Duru, A., R.J. Iyengar and A. Thevaranjan (2002), 'The Shielding of CEO Compensation from the Effects of Strategic Expenditures', Contemporary Accounting Research, Vol. 19, pp. 175-93.
16. Fischer, P.E. (1992), 'Optimal Contracting and Insider Trading Restrictions', Journal of Finance, Vol. 47, pp. 673-94.
17. Garen, J.E. (1994), 'Executive Compensation and Principal-Agent Theory', Journal of Political Economy, Vol. 102, pp. 1175-99.
18. Gaver, J.J. and K.M. Gaver (1998), 'The Relation Between Nonrecurring Accounting Transactions and CEO Cash Compensation', Accounting Review, Vol. 73, pp. 235-53.
19. Hall, B.J. and J.B. Liebman (1998), 'Are CEOs Really Paid Like Bureaucrats', Quarterly Journal of Economics, Vol. 113, pp. 653-91.
20. Harris, D.G. and J.R. Livingstone (2002), 'Federal Tax Legislation as an Implicit Contracting Cost Benchmark: The Definition of Excessive Executive Compensation', Accounting Reinew, Vol. 77, pp. 997-1018.
21. Hayes, R.M. and S. Schaefer (2000), 'Implicit Contract and the Explanatory Power of Top Executive Compensation for Future Performance', Rand Journal of Economics, Vol. 31, pp. 273-93.
22. Jensen, M.C. and K.J. Murphy (1990), 'Performance Pay and Top-Management Incentives', Journal, of Political Economy, Vol. 98, pp. 225-64.
23. Ke, B., S. Huddart and K. Petroni (2003), 'What Insiders Know about Future Earnings and How They Use It: Evidence From Insider Trades', Journal of Accounting and Economics, Vol. 35, pp. 315-46.
24. Kim, O. and Y. Suh (1993), 'Incentive Efficiency of Compensation Based on Accounting and Market Performance', Journal of Accounting and Economics, Vol. 16, pp. 25-53.
25. Lakonishok, J. and I. Lee (2001), 'Are Insider Trades Informative', Review of Financial Studies, Vol. 14, pp. 79-111.
26. Lambert, R.A. and D.F. Larcker (1987), 'An Analysis of the Use of Accounting and Market Measures of Performance in Executive Compensation Contracts', Journal of Accounting Research, Vol. 25 (Supplement), pp. 85-125.
27. Manne, H. (1966), Insider Trading and the Stock Market (Free Press, New York).
28. Noe, T.H. (1997), 'Insider Trading and the Problem of Corporate Agency', Journal of Law, Economics, and Organization, Vol. 13, pp. 287-318.
29. Ofek, E. and D. Yermack (2000), 'Taking Stock: Equity-Based Compensation and the Evolution of Managerial Ownership', Journal of Finance, Vol. 52, pp. 1367-84.
30. Piotroski, J. and D. Roulstone (2005), 'Do Insider Trades Reflect Both Contrarian Beliefs and Superior Knowledge About Future Cash Flow Realizations', Journal of Accounting and Economics, Vol. 39, pp. 55-81.
31. Roulstone, D. (2003), 'The Relation Between Insider-Trading Restrictions and Executive Compensation', Journal of Accounting Research, Vol. 41, pp. 525-51.
32. Rozeff, M.S. and M.A. Zaman (1988), 'Market Efficiency and Insider Trading: New Evidence', Journal of Business, Vol. 61, pp. 25-44.
33. _ _ (1998), 'Overreaction and Insider Trading: Evidence from Growth and Value Portfolios', Journal of Finance, Vol. 53, pp. 701-16.
34. Seyhun, H.N. (1986), 'Insiders' Profits, Costs of Trading, and Market Efficiency', Journal of Financial Economics, Vol. 16, pp. 189-212.
35. _ (1992), 'Why Does Aggregate Insider Trading Predict Future Stock Returns', Quarterly Journal of Economics, Vol. 107, pp. 1303-31.
36. Sloan, R.G. (1993), 'Accounting Earnings and Top Executive Compensation', Journal of Accounting and Economics, Vol. 16, pp. 55-100.