Do co-opted boards increase insider profitability?

Using a sample of U.S. firms over the period 1996–2014, this paper examines whether insider trading profitability increases with high board co-option. Indeed, we find that higher level co-opted directors exhibit profitability, largely due to lower managerial ability and analyst coverage. Co-opted boards are also unlikely implement self-imposed restrictions, exacerbating relationship. This positive association is mitigated by external monitoring institutional investors if CEO receives more performance-based incentives. Overall, demonstrate aligned interests CEOs corporate insiders rather than performing their role as monitors. As result, positively associated exploitative behaviour insiders.