Stock trading behaviour and firm performance: Do CEO equity-based compensation and block ownership matter?

Larelle Chapple; Brandon Chen; Tahir Suleman; Thu Phuong Truong

doi:10.1016/j.pacfin.2019.03.006

Stock trading behaviour and firm performance: Do CEO equity-based compensation and block ownership matter?

Larelle Chapple, Brandon Chen, Tahir Suleman, Thu Phuong Truong^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

3 Scopus citations

Abstract

Using unique and proprietary daily trade data from qualified market participants, our study empirically investigates the impact of trading aggressiveness on firm performance and the moderating impact of equity-based compensation and block ownership. Based on a dataset including 3,775,646 daily trades by 35 qualified market participants for 414 New Zealand Exchange (NZX) listed firms over the period 1996–2011, we find that aggressive trading does not consistently improve firm performance across all trading measures and after addressing endogeneity concern. Our findings even hold among firms with CEO equity-based compensation and high level of block ownership. Our study challenges the crucial role of CEO equity-based pay and block ownership in the theory of “governance through trading”.

Original language	English
Article number	101129
Journal	Pacific Basin Finance Journal
Volume	66
DOIs	https://doi.org/10.1016/j.pacfin.2019.03.006
State	Published - Apr 2021
Externally published	Yes

Bibliographical note

Publisher Copyright:
© 2019 Elsevier B.V.

Keywords

Block ownership
CEO equity-based compensation
Firm performance
Governance through trading

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/j.pacfin.2019.03.006

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title = "Stock trading behaviour and firm performance: Do CEO equity-based compensation and block ownership matter?",

abstract = "Using unique and proprietary daily trade data from qualified market participants, our study empirically investigates the impact of trading aggressiveness on firm performance and the moderating impact of equity-based compensation and block ownership. Based on a dataset including 3,775,646 daily trades by 35 qualified market participants for 414 New Zealand Exchange (NZX) listed firms over the period 1996–2011, we find that aggressive trading does not consistently improve firm performance across all trading measures and after addressing endogeneity concern. Our findings even hold among firms with CEO equity-based compensation and high level of block ownership. Our study challenges the crucial role of CEO equity-based pay and block ownership in the theory of “governance through trading”.",

keywords = "Block ownership, CEO equity-based compensation, Firm performance, Governance through trading",

author = "Larelle Chapple and Brandon Chen and Tahir Suleman and Truong, \{Thu Phuong\}",

note = "Publisher Copyright: {\textcopyright} 2019 Elsevier B.V.",

year = "2021",

month = apr,

doi = "10.1016/j.pacfin.2019.03.006",

language = "English",

volume = "66",

journal = "Pacific Basin Finance Journal",

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AU - Chapple, Larelle

AU - Chen, Brandon

AU - Suleman, Tahir

AU - Truong, Thu Phuong

PY - 2021/4

Y1 - 2021/4

N2 - Using unique and proprietary daily trade data from qualified market participants, our study empirically investigates the impact of trading aggressiveness on firm performance and the moderating impact of equity-based compensation and block ownership. Based on a dataset including 3,775,646 daily trades by 35 qualified market participants for 414 New Zealand Exchange (NZX) listed firms over the period 1996–2011, we find that aggressive trading does not consistently improve firm performance across all trading measures and after addressing endogeneity concern. Our findings even hold among firms with CEO equity-based compensation and high level of block ownership. Our study challenges the crucial role of CEO equity-based pay and block ownership in the theory of “governance through trading”.

AB - Using unique and proprietary daily trade data from qualified market participants, our study empirically investigates the impact of trading aggressiveness on firm performance and the moderating impact of equity-based compensation and block ownership. Based on a dataset including 3,775,646 daily trades by 35 qualified market participants for 414 New Zealand Exchange (NZX) listed firms over the period 1996–2011, we find that aggressive trading does not consistently improve firm performance across all trading measures and after addressing endogeneity concern. Our findings even hold among firms with CEO equity-based compensation and high level of block ownership. Our study challenges the crucial role of CEO equity-based pay and block ownership in the theory of “governance through trading”.

KW - Block ownership

KW - CEO equity-based compensation

KW - Firm performance

KW - Governance through trading

UR - https://www.scopus.com/pages/publications/85065795914

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DO - 10.1016/j.pacfin.2019.03.006

M3 - Article

AN - SCOPUS:85065795914

SN - 0927-538X

VL - 66

JO - Pacific Basin Finance Journal

JF - Pacific Basin Finance Journal

M1 - 101129

ER -

Stock trading behaviour and firm performance: Do CEO equity-based compensation and block ownership matter?

Abstract

Bibliographical note

Keywords

ASJC Scopus subject areas

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