Ethical Implications of Marriage - Evidence from CEO Insider Trading

Insider trading is regarded as an unethical practice that promotes insiders’ self-interests at the expense of uninformed traders. We investigate the association between a chief executive officer (CEO)’s marital status and her tendency to profit from insider trading. We argue that marriage can constrain CEOs’ self-serving behavior and show that married CEOs earn lower future abnormal profits compared to single CEOs in their insider trading activities. Our empirical results remain robust after accounting for endogeneity concerns. We also find that married CEOs are less likely to engage in opportunistic trades, and the negative relation between married CEOs and insider trading profits is more prominent for firms with poor corporate governance and a higher level of information asymmetry