Insider Preferences

Insider preferences refer to the tendency of company insiders—like executives or board members—to make decisions that benefit themselves, often at the expense of regular shareholders or the company's overall performance. For example, they might choose projects that boost their own compensation or influence, rather than those that maximize profits for investors. This can create a conflict of interest, as insiders may prioritize personal gain over the best interests of the company and its shareholders. Understanding these preferences helps investors assess potential risks associated with their investments.