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Martha Stewart. Don Tyson Mark Cuban Do They Do It for the Money? Utpal Bhattacharya Cassandra Marshall CSEF-IGIER Symposium Capri, Italy June 23, 2010.

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Presentation on theme: "Martha Stewart. Don Tyson Mark Cuban Do They Do It for the Money? Utpal Bhattacharya Cassandra Marshall CSEF-IGIER Symposium Capri, Italy June 23, 2010."— Presentation transcript:

1 Martha Stewart

2 Don Tyson

3 Mark Cuban

4 Do They Do It for the Money? Utpal Bhattacharya Cassandra Marshall CSEF-IGIER Symposium Capri, Italy June 23, 2010

5 Cassandra Marshall

6 Gary Becker

7 Fyodor Dostoevsky

8 Edwin Sutherland

9 Null Hypothesis If the motivation for illegal insider trading is economic, we should see the “poorer” top management being convicted, controlling for the opportunities for insider trading.

10 Data SEC Litigation Releases of individuals convicted of insider trading in the United States from September 1995 through December 2004 (576 releases) for trades during Firms in which top management was convicted of insider trading (41 firms) –Control Group: All other firms in Compustat during the insider trading years (169,825 firm/years) – Table 1

11 Data (Continued) Top management convicted of insider trading with compensation available (52 individuals, 41 firms) –Control Group: All other executives in a matched sample of Compustat firms (matched by year, industry, size, and title) – Table 2. All other executives in other Execucomp firms – Tables 3, 4, 5 Top management convicted of insider trading with compensation who trade on M&A information (9 individuals, 9 firms) –Control Group: All other executives in Execucomp during the insider trading years whose firm was involved in a Merger or Acquisition in SDC (101,188 individual/firm/years) – Tables 6 and 7

12 Are the firms different? VariableSample (41 firms)Control (Compustat) Size (Assets, Sales) Profitability (ROA, ROE) Leverage Growth Opportunities (Market-to-Book) Industry Composition

13 Are the top managers poorer? (NOT controlling for benefits) (Table 3 Probit: Y=1 for convicted inside trader)

14 Are the top managers poorer? (NOT controlling for benefits) (Table 4 Rare Events Logit: Y=1 for convicted inside trader)

15 Are the top managers poorer? (NOT controlling for benefits) (Table 5 IV Probit: Y=1 for convicted inside trader)

16 Are the top managers poorer? (Controlling for benefits) (Table 6 Probit: Y=1 for convicted inside trader)

17 Are the top managers poorer? (Controlling for benefits) (Table 7 Rare Events Logit: Y=1 for convicted inside trader)

18 Conclusion So, do they do it for the money? Maybe, but it does not seem to be an important reason Then why do they do it? We leave that for future research Possible Motives: Psychological (e.g.,Hubris) Sociological (e.g.,Company Culture) You tell me


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