Insider Trading Around ESOP Announcements: Wealth Effect vs. Control Effect

Authors

  • Zahid Iqbal Texas Southern University, United States
  • Glenn N. Pettengill Emporia State University, United States
  • Shekar Shetty Western New England University, United Kingdom

DOI:

https://doi.org/10.32890/ijbf2003.1.2.5

Abstract

Following the enactment of ERISA (Employee Retirement Income Security Act) in 1974, employee stock ownership plans (ESOPs) have become a popular form of employee compensation among U.S. companies. The introduction of an ESOP has important implications for management interest that should encourage insiders buying activity. This paper documents that unusual insider buying activity has indeed resulted from the introduction of an ESOP. Further we examine two competing explanations, the wealth hypothesis and the control hypothesis, for the increase in insiders buying activity. We conclude that insiders buying activity is primarily motivated by control considerations.

 

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Published

19-08-2003

Issue

Vol. 1 No. 2 (2003): International Journal of Banking and Finance (IJBF) Vol. 1, No.2, 2003

Section

Articles

How to Cite

Iqbal, Z., Pettengill, G. N., & Shetty, S. (2003). Insider Trading Around ESOP Announcements: Wealth Effect vs. Control Effect. International Journal of Banking and Finance, 1(2), 89-110. https://doi.org/10.32890/ijbf2003.1.2.5

Research impact

Harvested 2026-09-07
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Identifiers DOI 10.32890/ijbf2003.1.2.5 OpenAlex W4245580782