Business Finance Research Seminar: Professor Anh Tran

Authors

Eliezer M Fich, Drexel University, Department of Finance

Robert Parrino, University of Texas at Austin, Department of Finance.

Anh Tran, Bayes Business School (formerly Cass Business School), City University of London

Abstract:

We study Securities and Exchange Commission (SEC) Rule 10b5-1 stock trading plans. The empirical evidence shows that firm, transaction, and CEO compensation characteristics are different for plan and non-plan stock sales. We observe less opportunistic trading with plan sales and find that good corporate governance can substitute for a plan in limiting such trading. However, opportunistic trading within Rule 10b5-1 plans is more pronounced when the transaction value is large relative to the CEO’s total compensation. CEOs can circumvent Rule 10b5-1 insider trading restrictions by exercising their discretion over financial reporting, real earnings management, and by using limit order provisions.

Keywords: CEO stock sales, 10b5-1 plan, insider trading, governance

JEL Classification: G34

Bio:

https://www.bayes.city.ac.uk/faculties-and-research/experts/anh-tran

Host or Publisher University of Sussex Business School