Research On The Impact Of Executive Compensation On Insider Trading

Insider trading seriously damages the principle of "justness,fairness and openness"of the capital market and is extremely harmful to the healthy development of the capital market.Corporate executives are both insiders of insider information and major participants in insider trading.Academic and practical circles generally agree that executive monetary compensation may be one of the important factors affecting insider trading,but the empirical evidence is limited.Based on this,this paper takes the major mergers and reorganizations of Chinese listed companies from 2013 to 2017 as the sample to conduct an empirical study on the relationship between executive compensation and insider trading.The empirical results show that:(1)The impact of executive compensation on insider trading is significant whether the executive compensation is measured by enterprise performance,market-oriented executive compensation or other executive compensation,that is,the lower the level of executive compensation,the more serious the degree of insider trading.(2)the executive compensation has a significant impact on insider trading when the management's shareholding level is low,but it is not significant when the management's shareholding level is high.That means that the management shareholding plays its due role as an explicit replacement mechanism for executive monetary compensation.(3)under different property rights,the relationship between executive compensation and insider trading is obviously different.When it comes to corporate performance,it is established in the private enterprise group.When the market-oriented executives are paid for reference,the local state-owned enterprise group was established.When the other executive compensation of the company is used as a reference,the central state-owned enterprise group was established.The main contributions of this paper are as follows:Firstly,on the basis of existing research,we measure executive compensation more comprehensively,especially innovatively put forward a new measurement method of executive compensation based on market-oriented executive compensation,which explores the influence of executive compensation on insider trading from the aspects of executive psychology and behavior;Secondly,we integrate the explicit monetary incentive mechanism of executive stock ownership into the sub-system.The analysis framework empirically examines the substitution effect of equity incentives on monetary compensation;Thirdly,based on the reality that there are huge differences in compensation contracts and supervision and control between enterprises with Chinese characteristies of property rights,this research empirically examines the differences in the impact of executive compensation on insider trading under different property rights.The research results and policy recommendations of this paper have important theoretical and practical significance for optimizing executive compensation design,Improving Executive Incentive mechanism,restraining insider trading in capital market,protecting investors' interests,and maintaining the healthy and orderly development of China's capital market.