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Political lobbying, insider trading, and CEO compensation

Author

Listed:
  • Brodmann, Jennifer
  • Unsal, Omer
  • Hassan, M. Kabir

Abstract

In this study, we determine why CEOs from lobbying firms receive higher pay compared to their non-lobbying peers. We investigate whether insider trading can explain high CEO pay. Using hand-collected firm-level lobbying data, we examine whether CEOs from lobbying firms engage in insider trading after sponsored bills are introduced and passed in the U.S. Congress. Our results show that the number of CEO stock transactions from lobbying firms correlates with bills being passed, which yields higher compensation packages. In addition, we find that lobbying benefits firm performance. Lobbying firms receive more government contracts, which increases firm value. Overall, lobbying benefits both CEOs and shareholders.

Suggested Citation

  • Brodmann, Jennifer & Unsal, Omer & Hassan, M. Kabir, 2019. "Political lobbying, insider trading, and CEO compensation," International Review of Economics & Finance, Elsevier, vol. 59(C), pages 548-565.
  • Handle: RePEc:eee:reveco:v:59:y:2019:i:c:p:548-565
    DOI: 10.1016/j.iref.2018.10.020
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    References listed on IDEAS

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    More about this item

    Keywords

    Insider trading; Political lobbying; Firm performance;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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