Document Type

Article

Publication Date

7-15-2025

Abstract

This paper provides empirical evidence that insider opportunistic trading increases the likelihood of forced chief executive officer (CEO) turnover, but not voluntary CEO turnover. To identify the causal effect, I study an exogenous shock— the enactment of SEC Rule 10b5-1—and find that the enactment reduces the likelihood of forced CEO turnover. To analyze the possible reason for the results, I document that opportunistic insider trading (especially insider sells) increases the likelihood of undertaking an acquisition and reduces announcement returns. Firms with aggressive insider trading also are more likely to become takeover targets. Together, the evidence suggests that the board fires CEOs to prevent the leakage of important information regarding corporate investments, such as acquisitions, and to avoid acquiring by other companies.

Digital Object Identifier (DOI)

https://doi.org/10.1007/s10690-025-09547-1

Comments

Originally published as:

Li, K. The Dark Side of Insider Trading. Asia-Pac Financ Markets (2025). https://doi.org/10.1007/s10690-025-09547-1

Open Access This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons license, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons license and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/.

Download

Share

COinS