Managerial Traits and Equity-Based Compensation

Joint project between Hanken and the University of Oulu.

This project investigates how personal characteristics of board members, CEOs, CFOs and other top corporate insiders affect two key decisions on stock-based executive compensation: the design of their stock-based compensation schemes and the subsequent insider trading on these stocks. In particular, the project explores whether insiders with adverse personal characteristics opportunistically seek for personal gains first by influencing the terms of their stock-based compensation systems and then by timing their trading on the stocks they have received from these compensation systems. In addition, the possible effect of stringent vs. lax corporate governance environments on insider trading will be explored. The results will contribute significantly to academic knowledge of corporate insiders’ trading behaviour and the design of stock-based executive compensation systems, and will moreover be useful for firms and regulatory bodies in developing corporate legislation and corporate governance codes. Team members’ recent publications in top-tier journals on this theme demonstrate that exploring the effect of corporate insiders’ personal characteristics on financial decisions is a very promising research area.