Abstract

http://ssrn.com/abstract=2103523
 
 

References (36)



 


 



Internal Corporate Governance and the Profitability of Insider Trading


Lili Dai


Australian National University (ANU)

Renhui Fu


Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

Jun-Koo Kang


Nanyang Technological University (NTU) - Nanyang Business School

Inmoo Lee


KAIST College of Business

September 16, 2015


Abstract:     
This paper examines how internal governance systems limit insiders’ ability to profit from their information advantage. We find that compared with insiders of poorer-governed firms, insiders of better-governed firms earn significantly smaller abnormal profits from their sales transactions but not from their purchase transactions. This governance effect is more pronounced in firms with greater litigation risk. Moreover, better-governed firms are more likely to put in place ex-ante preventive measures (e.g., voluntary insider trading restriction policies) and to implement such measures more effectively, and are more active in taking ex-post disciplinary actions against CEOs who earn large abnormal profits from their sales transactions.

Number of Pages in PDF File: 55

Keywords: Internal corporate governance; Insider purchases; Insider sales; Profitability of insider trading; Legal risk

JEL Classification: G34, J33, K31, M52, K22


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Date posted: July 11, 2012 ; Last revised: September 16, 2015

Suggested Citation

Dai, Lili and Fu, Renhui and Kang , Jun-Koo and Lee, Inmoo, Internal Corporate Governance and the Profitability of Insider Trading (September 16, 2015). Available at SSRN: http://ssrn.com/abstract=2103523 or http://dx.doi.org/10.2139/ssrn.2103523

Contact Information

Lili Dai
Australian National University (ANU) ( email )
Canberra, Australian Capital Territory 2601
Australia
Renhui Fu (Contact Author)
Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management ( email )
1954 Huashan Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200030
China
+8618521090980 (Phone)
Jun-Koo Kang
Nanyang Technological University (NTU) - Nanyang Business School ( email )
Nanyang Avenue, Block S3-01b-54
Singapore, 639798
Singapore
(+65) 6790-5662 (Phone)
(+65) 6791-3697 (Fax)
HOME PAGE: http://www.nbs.ntu.edu.sg/nbs_corporate/divisions/bnf/index.asp
Inmoo Lee
KAIST College of Business ( email )
85 Hoegiro Dongdaemun-Gu
Seoul 130-722
Korea, Republic of (South Korea)
Feedback to SSRN


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