Insiders' Personal Stock Donations from the Lens of Stakeholder, Stewardship and Agency Theories

17 Pages Posted: 22 Sep 2011

See all articles by Sudip Ghosh

Sudip Ghosh

Pennsylvania State University

Maretno A. Harjoto

Pepperdine University - Pepperdine Graziadio Business School (PGBS)

Date Written: October 2011

Abstract

This paper studies the relationship between personal stock donation by top executives and board of directors (insiders) of publicly traded corporations and their personal tax, shareholders' returns, and social responsibility. The study finds evidence that the timing of stock donations is driven by personal tax gain. The study further shows, comparing stock gift corporations relative to their non‐stock gift cohorts, that personal stock gifts are associated with lower short‐term and long‐term stock returns to shareholders. This implies that stock donation driven by insiders' personal gain adversely affects shareholder wealth. However, the likelihood and intensity of insiders to make personal stock donation is reduced when firms have strong corporate social responsibility (CSR). Agency theory explains insiders' opportunistic behavior, stakeholder theory is also supported by evidence that stock donation is negatively related to CSR, and stewardship theory offers a different view to explain the rationale behind insiders' stock donation and shareholders' reactions to stock gifts.

Suggested Citation

Ghosh, Sudip and Harjoto, Maretno Agus, Insiders' Personal Stock Donations from the Lens of Stakeholder, Stewardship and Agency Theories (October 2011). Business Ethics: A European Review, Vol. 20, Issue 4, pp. 342-358, 2011. Available at SSRN: https://ssrn.com/abstract=1932011 or http://dx.doi.org/10.1111/j.1467-8608.2011.01633.x

Sudip Ghosh (Contact Author)

Pennsylvania State University ( email )

Berks Campus
Reading, PA 19610
United States

Maretno Agus Harjoto

Pepperdine University - Pepperdine Graziadio Business School (PGBS) ( email )

Drescher Campus Suite 344
24255 Pacific Coast Highway
Malibu, CA 90263
United States
(310) 506-8542 (Phone)
(310) 506-4126 (Fax)

HOME PAGE: http://scholar.google.com/citations?hl=en&user=9-PfQi0AAAAJ

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