RT Journal Article SR Electronic T1 Managerial Compensation and Trading Activity JF The Journal of Investing FD Institutional Investor Journals SP 81 OP 91 DO 10.3905/joi.2012.21.4.081 VO 21 IS 4 A1 Feifei Li A1 Avanidhar Subrahmanyam YR 2012 UL https://pm-research.com/content/21/4/81.abstract AB We propose that due to a lack of sophistication and unfamiliarity with accounting conventions, nave (unsophisticated) investors may be unable to discern true managerial compensation from financial statements. Compensation may therefore be higher when such investors are more active. Technologies that lower trading costs for retail investors encourage entry of such investors and raise expected compensation. In general, such compensation can be reduced through requirements that increase disclosure transparency. Empirical tests provide support to our hypothesis that direct and indirect compensation should be higher in stocks with higher liquidity, which are likely to have greater unsophisticated investor participation.TOPICS: Manager selection, equity portfolio management, accounting and ratio analysis