Insider Trading and Corporate Information Transparency

20 Pages Posted: 15 Sep 2012

See all articles by Feng Gu

Feng Gu

State University of New York at Buffalo

John Q. Li

affiliation not provided to SSRN

Date Written: November 2012

Abstract

Our study examines the relation between insider trading and corporate information transparency. We find a negative relation between firms’ information transparency and the economic significance of insider trading, including the amount of insider purchase and sale and the profitability of insider transactions. We also find a negative relation between information transparency and stock price reaction to news of insider trading, which suggests that increases in information transparency preempt insiders’ private information. Our study provides evidence consistent with firms’ transparency‐enhancing activities decreasing information asymmetry between insiders and investors by revealing insiders’ private information to investors in a timely manner.

Keywords: corporate information transparency, insider trading, information asymmetry

JEL Classification: G1

Suggested Citation

Gu, Feng and Li, John Q., Insider Trading and Corporate Information Transparency (November 2012). Financial Review, Vol. 47, Issue 4, pp. 645-664, 2012. Available at SSRN: https://ssrn.com/abstract=2147080 or http://dx.doi.org/10.1111/j.1540-6288.2012.00345.x

Feng Gu

State University of New York at Buffalo ( email )

12 Capen Hall
School of Management
Buffalo, NY 14221

John Q. Li (Contact Author)

affiliation not provided to SSRN ( email )

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