Does Trading Really Boost Performance?

30 Pages Posted: 22 Aug 2014

See all articles by Brandon Chen

Brandon Chen

University of Technology Sydney (UTS)

Thu Phuong Truong

Victoria University of Wellington - Te Herenga Waka

Muhammad Tahir Suleman

University of Otago - Department of Accountancy and Finance

Date Written: August 22, 2014

Abstract

Using unique and proprietary daily trade data from all qualified market participants, our study empirically investigates the impact of trading on firm performance in a setting where CEO pay is not linked to stock performance. Based on a dataset including 3,775,646 daily trades for 414 NZX-listed firms and 35 qualified market participants over the period 1995-2011, we find that aggressive trading does not improve firm performance as documented in previous research. In fact, we provide significant evidence that aggressive trading actually hurts firm performance. Our study underlines the crucial role of CEO equity-based pay in the theory of governance through trading.

Keywords: governance through trading, firm performance, stock-incentivised compensation

JEL Classification: G10, G20, G30, N20

Suggested Citation

Chen, Brandon and Truong, Thu Phuong and Suleman, Muhammad Tahir, Does Trading Really Boost Performance? (August 22, 2014). 27th Australasian Finance and Banking Conference 2014 Paper, Available at SSRN: https://ssrn.com/abstract=2485045

Brandon Chen (Contact Author)

University of Technology Sydney (UTS) ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia

Thu Phuong Truong

Victoria University of Wellington - Te Herenga Waka ( email )

P.O. Box 600
Wellington, 6140
New Zealand
64 4 463 5233 (ext 8961) (Phone)
64 4 463 5076 (Fax)

Muhammad Tahir Suleman

University of Otago - Department of Accountancy and Finance ( email )

PO Box 56
Dunedin, 9054
New Zealand

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