Determinants and trading performance of equity deferrals by corporate outside directors

Francesca Franco, Christopher D. Ittner, Oktay Urcan

Research output: Contribution to journalArticlepeer-review


This study investigates the determinants and trading performance of outside directors' equity deferrals, which represent the choice to convert part or all of their annual cash compensation into deferred company stock. Using a large sample of S&P 1500 firms that allowed directors to defer their cash fees into equity between 1999 and 2009, we find significant associations between equity deferral choices and specific features of the director compensation plans, proxies for directors' outside wealth diversification, and future firm stock market performance. Trading performance analyses indicate that outside directors earn substantial abnormal returns from their deferrals, with a significant proportion of the deferral transactions occurring during blackout periods. These results are consistent with companies structuring director equity deferral plans to circumvent U.S. Securities and Exchange Commission Rule 10b-5's trading restrictions.

Original languageEnglish (US)
Pages (from-to)114-138
Number of pages25
JournalManagement Science
Issue number1
StatePublished - Jan 2017


  • Deferred compensation
  • Insider trading
  • Outside directors
  • SEC Rule 10b-5 plans

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research


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