Controlling the Agency Cost of Insider Trading
نویسندگان
چکیده
This study provides a unique use of abnormal profits from insider trading to measure a specific form of agency cost between outside shareholder and insiders—the agency cost of insider trading. Cross-sectional differences in the utilization of various bonding and monitoring mechanisms are examined to determine the relative effectiveness of alternative strategies in controlling such agency cost. Institutional shareholders and separation of the CEO and board chairman positions are shown to be effective in minimizing the agency cost of insider trading.
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