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Journal of Corporate Finance Vol. 29 2014

Do voluntary corporate restrictions on insider trading eliminate informed insider trading?

Inmoo Lee1,2; Michael L. Lemmon3; Yan Li; John M. Sequeira4

1 Korea Institute for Advanced Study · 2 Korea Advanced Institute of Science and Technology · 3 University of Utah · 4 Monetary Authority of Singapore, 10 Shenton Way, MAS Building, 079117, Singapore

open access

Abstract

We investigate whether voluntary corporate restrictions on insider trading effectively prevent insiders from exploiting their private information. Our results show that insiders of firms with seeming restrictions on insider trading continue to take advantage of positive private information while being more cautious when exploiting negative private information. The results suggest that insiders continue to exploit their informational advantages in a way that minimizes their legal risk. We also find that the degree of information asymmetry is significantly lower in firms with restriction policies and that corporate governance significantly affects firms' decisions to adopt these policies.

DOI
10.1016/j.jcorpfin.2014.07.005
Volume
29
Pages
158-178
Language
en
Sources
bibtex:phds-export.bib crossref openalex

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