The Governance Effect of the Media’s News Dissemination Role: Evidence from Insider Trading

56 Pages Posted: 31 Oct 2013 Last revised: 13 Jun 2017

See all articles by Lili Dai

Lili Dai

University of New South Wales (UNSW) - School of Accounting

Jerry T. Parwada

UNSW Australia Business School, School of Banking and Finance; UNSW Business School; Financial Research Network (FIRN)

Bohui Zhang

The Chinese University of Hong Kong, Shenzhen

Date Written: January 15, 2015

Abstract

We investigate whether the media plays a role in corporate governance by disseminating news. Using a comprehensive dataset of corporate and insider news coverage for the 2001-2012 period, we show that the media reduces insiders’ future trading profits by disseminating news on prior insiders’ trades available from regulatory filings. We find support for three economic mechanisms underlying the disciplining effect of news dissemination: the reduction of information asymmetry, concerns regarding litigation risk, and the impact on insiders’ personal wealth and reputation. Our findings provide new insights into the real effect of news dissemination.

Keywords: Media, Information Dissemination, Corporate Governance, Insider Trading

JEL Classification: G32, G34, J33, M41

Suggested Citation

Dai, Lili and Parwada, Jerry T. and Zhang, Bohui, The Governance Effect of the Media’s News Dissemination Role: Evidence from Insider Trading (January 15, 2015). Journal of Accounting Research, Vol. 53, No. 2, 2015. Available at SSRN: https://ssrn.com/abstract=2347896 or http://dx.doi.org/10.2139/ssrn.2347896

Lili Dai

University of New South Wales (UNSW) - School of Accounting ( email )

Room 3094
Quadrangle Building, UNSW Sydney
Sydney, NSW 2052
Australia

HOME PAGE: http://sites.google.com/site/ldaiprofile

Jerry T. Parwada

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

UNSW
Sydney, NSW 2052
Australia

HOME PAGE: http://www.firn.org.au

Bohui Zhang (Contact Author)

The Chinese University of Hong Kong, Shenzhen ( email )

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