Do They Do It For The Money?

32 Pages Posted: 11 Mar 2009 Last revised: 12 May 2014

See all articles by Utpal Bhattacharya

Utpal Bhattacharya

HKUST Business School

Cassandra D. Marshall

University of Richmond - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: November 9, 2011


Using a sample of all top management who were indicted for illegal insider trading in the United States for trades during the period 1989-2002, we explore the economic rationality of this white-collar crime. If this crime is an economically rational activity in the sense of Becker (1968), where a crime is committed if its expected benefits exceed its expected costs, “poorer” top management should be doing the most illegal insider trading. This is because the “poor” have less to lose (present value of foregone future compensation if caught is lower for them.) We find in the data, however, that indictments are concentrated in the “richer” strata after we control for firm size, industry, firm growth opportunities, executive age, the opportunity to commit illegal insider trading, and the possibility that regulators target the “richer” strata. We thus rule out the economic motive for this white-collar crime, and leave open the possibility of other motives.

Keywords: white-collar crime, insider trading, SEC enforcement, CEO compensation

JEL Classification: G14, G18, G34, G38

Suggested Citation

Bhattacharya, Utpal and Marshall, Cassandra Dawn, Do They Do It For The Money? (November 9, 2011). AFA 2011 Denver Meetings Paper, Available at SSRN: or

Utpal Bhattacharya (Contact Author)

HKUST Business School ( email )

Clear Water Bay
Hong Kong

Cassandra Dawn Marshall

University of Richmond - Department of Finance ( email )

1 Gateway Rd
Richmond, VA 23173
United States

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