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Insider Trading Restrictions and Top Executive Compensation

Journal of Accounting and Economics, Forthcoming

American Finance Association, AFA 2010 Atlanta Meetings

59 Pages Posted: 14 Aug 2011 Last revised: 17 Sep 2013

David J. Denis

University of Pittsburgh

Jin Xu

Virginia Tech - Pamplin College of Business

Date Written: April 8, 2013

Abstract

The use of equity incentives is significantly greater in countries with stronger insider trading restrictions, and these higher incentives are associated with higher total pay. These findings are robust to alternative definitions of insider trading restrictions and enforcement, and to panel regressions with country fixed effects. We also find significant increases in top executive pay and the use of equity-based incentives in the period immediately following the initial enforcement of insider trading laws. We conclude that insider trading laws are one channel through which cross-country differences in pay practices can be explained.

Keywords: insider trading restrictions, executive compensation, insider ownership

JEL Classification: G18, G32, G34

Suggested Citation

Denis, David J. and Xu, Jin, Insider Trading Restrictions and Top Executive Compensation (April 8, 2013). Journal of Accounting and Economics, Forthcoming; American Finance Association, AFA 2010 Atlanta Meetings. Available at SSRN: https://ssrn.com/abstract=1909065 or http://dx.doi.org/10.2139/ssrn.1909065

David J. Denis

University of Pittsburgh ( email )

Katz Graduate School of Business
Pittsburgh, PA 15260
United States
412-648-1708 (Phone)

Jin Xu (Contact Author)

Virginia Tech - Pamplin College of Business ( email )

Department of Finance
880 West Campus Dr
Blacksburg, VA 24061
United States

HOME PAGE: http://www.finance.pamplin.vt.edu/jin-xu/

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