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
Date Written: January 15, 2015
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: Suggested Citation