Executive Deferral Plans and Insider Trading†

Francesca Franco, Oktay Urcan

Research output: Contribution to journalArticlepeer-review


We study executive equity contributions to nonqualified deferred compensation plans, which consist of the election to defer part or all of the executive's annual base salary and other cash pay into the company's stock. These transactions provide executives with an alternative channel to purchase shares in the firm while benefiting from an affirmative defense against illegal insider-trading allegations. Using a large sample of executive equity deferrals over 2000–2014, we find evidence that executives use these transactions as a means to acquire the company's stock during blackout windows. Consistent with the conjecture that deferrals can benefit from lower litigation costs that inhibit insider trades before the release of corporate news, we also find that the deferred amounts are significantly higher (lower) before the disclosure of good (bad) earnings news. These results suggest that executives can use equity deferrals to circumvent Rule 10b5 trading restrictions and generate significant returns through the timing and content of corporate disclosures around these transactions. Together, our evidence supports the recent concerns that executives might be engaging in strategic information releases around Rule 10b5 transactions.

Original languageEnglish (US)
Pages (from-to)1054-1084
Number of pages31
JournalContemporary Accounting Research
Issue number2
StatePublished - Jun 1 2022


  • Rule 10b5-1 plans
  • deferred compensation
  • insider trading
  • strategic disclosures

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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