Background: Corporate governance as a concept has become increasingly popular since its introduction in the 1990s, as the division and exercise of power is an important aspect of today’s corporate world. One of the most essential parts of corporate governance is how the company’s board is constructed. Insider traders have been proven to gain a return higher than what should be expected, called abnormal returns. Literature has recently discovered a connection between a company’s board structure and how big insider traders’ abnormal returns are. Purpose: The purpose of this study is to investigate how different board structure measures affect the profitability of insider trading on the Swedish stock market post-Covid-19. Method: The study follows an event study methodology, focusing on the insider traders’ abnormal profit during two event windows of 35 and 183 days. The abnormal returns of 92 selected firms were calculated by using the market model to gather the expected return based on previous stock prices, and then comparing that expected return with the actual return of the insider. Furthermore, the board structure measures were collected from Refinitiv Eikon database, where data for all companies were found. To find the relationship between the abnormal return and board structure measures, an FGLS regression was applied, which could then be used to conclusions. Conclusion: The findings of the FGLS regression confirm the hypothesis that board structure measures do affect insiders’ abnormal returns. In the 35-day event window, a negative effect was found for board size and the percentage of independent board members in the company, while a positive effect was found for the amount of board member compensation. For the longer 183-day event window, the percentage of independent board members, CEO-Chairman duality and CEO compensation being linked to stock performance were all having a positive effect on the abnormal returns of insiders.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:hj-64249 |
| Date | January 2024 |
| Creators | Nilsson, David, Fraser, Eric |
| Publisher | Jönköping University, Internationella Handelshögskolan |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
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