Assessing moderating effects of insider trades on association between CEO power and stock price crash risk
| Column A | Column B | |||
|---|---|---|---|---|
| Variable | NCSKEWt+1 | NCSKEWt+1 | DUVOLt+1 | DUVOLt+1 |
| C_COMP | −4.81** (1.82) | −1.34 (1.90) | −1.16** (3.87) | −3.26 (3.84) |
| C_DUAL | −0.03* (0.05) | −0.09** (0.00) | −0.01* (0.01) | −0.05* (0.00) |
| C_STATUS | −0.02** (0.06) | −0.05* (0.04) | −0.07* (0.01) | −0.01* (0.01) |
| C_TENURE | 0.04 (0.00) | 0.00 (0.00) | 0.00 (0.01) | 0.00 (0.00) |
| C_DIRECTOR | −0.06* (0.10) | −0.24*** (0.00) | −0.04* (0.02) | −0.17* (0.00) |
| INSIDER_TRADES | 0.06* (0.03) | 0.10* (0.09) | 0.07*** (0.00) | 0.09* (0.02) |
| C_COMP* INSIDER_TRADES | – | −8.28 (1.33) | – | −1.45 (3.89) |
| C_DUAL* INSIDER_TRADES | – | −0.13* (0.12) | – | −0.01* (0.00) |
| C_STATUS* INSIDER_TRADES | – | −0.06* (0.01) | – | −0.11* (0.00) |
| C_TENURE* INSIDER_TRADES | – | 0.00* (0.08) | – | −0.00 (0.02) |
| C_DIRECTOR* INSIDER_TRADES | – | −0.06* (0.02) | – | −0.03** (0.00) |
| DTURNOVER | −0.00* (0.00) | −0.00 (0.00) | −2.04 (0.00) | −6.19 (0.00) |
| RET | 42.04*** (2.39) | 16.75* (14.03) | 4.38*** (0.51) | 4.26* (4.63) |
| M/B | −0.00** (0.00) | −0.00 (0.00) | −0.00* (0.00) | −0.00 (0.00) |
| SIZE | −0.11*** (0.02) | 0.04 (0.02) | 0.09*** (0.00) | 0.03 (0.01) |
| LEV | 0.17* (0.15) | 0.86* (0.21) | 0.12* (0.04) | 0.05 (0.03) |
| Constant | −3.19*** (0.47) | −1.55 (0.34) | −0.91*** (0.10) | −0.86 (0.15) |
| N | 2,360 | 2,360 | 2,360 | 2,360 |
| R2 | 0.43 | 0.67 | 0.31 | 0.46 |
| Year effects | Yes | Yes | Yes | Yes |
| Industry effects | Yes | Yes | Yes | Yes |
| Column A | Column B | |||
|---|---|---|---|---|
| Variable | NCSKEW | NCSKEW | DUVOL | DUVOL |
| C_COMP | −4.81** (1.82) | −1.34 (1.90) | −1.16** (3.87) | −3.26 (3.84) |
| C_DUAL | −0.03* (0.05) | −0.09** (0.00) | −0.01* (0.01) | −0.05* (0.00) |
| C_STATUS | −0.02** (0.06) | −0.05* (0.04) | −0.07* (0.01) | −0.01* (0.01) |
| C_TENURE | 0.04 (0.00) | 0.00 (0.00) | 0.00 (0.01) | 0.00 (0.00) |
| C_DIRECTOR | −0.06* (0.10) | −0.24*** (0.00) | −0.04* (0.02) | −0.17* (0.00) |
| INSIDER_TRADES | 0.06* (0.03) | 0.10* (0.09) | 0.07*** (0.00) | 0.09* (0.02) |
| C_COMP* INSIDER_TRADES | – | −8.28 (1.33) | – | −1.45 (3.89) |
| C_DUAL* INSIDER_TRADES | – | −0.13* (0.12) | – | −0.01* (0.00) |
| C_STATUS* INSIDER_TRADES | – | −0.06* (0.01) | – | −0.11* (0.00) |
| C_TENURE* INSIDER_TRADES | – | 0.00* (0.08) | – | −0.00 (0.02) |
| C_DIRECTOR* INSIDER_TRADES | – | −0.06* (0.02) | – | −0.03** (0.00) |
| DTURNOVER | −0.00* (0.00) | −0.00 (0.00) | −2.04 (0.00) | −6.19 (0.00) |
| RET | 42.04*** (2.39) | 16.75* (14.03) | 4.38*** (0.51) | 4.26* (4.63) |
| M/B | −0.00** (0.00) | −0.00 (0.00) | −0.00* (0.00) | −0.00 (0.00) |
| SIZE | −0.11*** (0.02) | 0.04 (0.02) | 0.09*** (0.00) | 0.03 (0.01) |
| LEV | 0.17* (0.15) | 0.86* (0.21) | 0.12* (0.04) | 0.05 (0.03) |
| Constant | −3.19*** (0.47) | −1.55 (0.34) | −0.91*** (0.10) | −0.86 (0.15) |
| N | 2,360 | 2,360 | 2,360 | 2,360 |
| 0.43 | 0.67 | 0.31 | 0.46 | |
| Year effects | Yes | Yes | Yes | Yes |
| Industry effects | Yes | Yes | Yes | Yes |
Note(s): C_COMP = CEO compensation; C_DUAL = CEO duality; C_STATUS = CEO status; C_TENURE = CEO tenure; C_DIRECTOR = CEO directorship; INSIDER_TRADES = insider trading; C_COMP*INSIDER_TRADES = interaction variable between CEO compensation and insider trading; C_DUAL*INSIDER_TRADES = interaction variable between CEO duality and insider trading; C_STATUS*INSIDER_TRADES = interaction variable between CEO status and insider trading; C_TENURE*INSIDER_TRADES = interaction variable between CEO tenure and insider trading; C_DIRECTOR*INSIDER_TRADES = interaction variable between CEO directorship and insider trading; NCSKEWt+1 = negative conditional skewness measured at t+1; DUVOLt+1 = down-to-up-volatility measured at t+1; DTURNOVER = de-trended turnover; RET = company-specific weekly returns; M/B = market to book value of equity; SIZE = size of company measured by taking the natural log of market capitalisation; LEV = leverage. *** and ** indicates the level of significance at 1 and 5%, respectively. t-statistics reported in the parentheses are based on robust standard errors. Pooled OLS hierarchical regression methodology has been applied to obtain the said test results. Column A relates to the testing of Model 9 where only the moderating variable is entered, while Column B represents the results pertaining to Model 10 where both the moderating and interaction variables are entered
Source(s): Author’s calculations based on using Stata 14
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