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

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  • Chapple, Larelle
  • Chen, Brandon
  • Suleman, Tahir
  • Truong, Thu Phuong

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”.

Suggested Citation

  • Chapple, Larelle & Chen, Brandon & Suleman, Tahir & Truong, Thu Phuong, 2021. "Stock trading behaviour and firm performance: Do CEO equity-based compensation and block ownership matter?," Pacific-Basin Finance Journal, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:pacfin:v:66:y:2021:i:c:s0927538x17303645
    DOI: 10.1016/j.pacfin.2019.03.006
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    More about this item

    Keywords

    Governance through trading; Firm performance; CEO equity-based compensation; Block ownership;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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