Managerial Opportunism and Corporate Investment Efficiency

Posted: 3 Oct 2019 Last revised: 22 Feb 2021

See all articles by Brian Silverstein

Brian Silverstein

Kansas State University - Department of Finance

Date Written: January 13, 2020


How does managerial opportunism affect corporate investment efficiency? Prior research establishes corporate investment efficiency as a function of the firm’s information environment and internal governance. We examine how managerial opportunism is an agency conflict that distorts corporate investment policy. We use an ex-ante firm level measure of managerial opportunism proxied with the insider trading activity of top executives and test its effects on firm investment efficiency and performance. Our results show that managerial opportunism decreases firm investment efficiency and has negative effects on both accounting and stock performance. Further tests show that both the quality of the information environment and internal governance moderate the negative effects of managerial opportunism, providing a unique perspective on how insider trading policy and regulation can affect corporate investment policy. Our results are robust to alternative proxies for firm governance, which includes board co-option, alternative model specifications, and tests for endogeneity.

Keywords: Insider Trading, Managerial Opportunism, Managerial Traits, Misconduct, Financial Reporting, Corporate Investment Efficiency

JEL Classification: G14, G34, G38, G41, M12, M14, M41

Suggested Citation

Silverstein, Brian, Managerial Opportunism and Corporate Investment Efficiency (January 13, 2020). Available at SSRN: or

Brian Silverstein (Contact Author)

Kansas State University - Department of Finance ( email )

Manhattan, KS 66506
United States

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