It is Easy to Be Brave from a Safe Distance: Proximity to the SEC and Insider Trading

59 Pages Posted: 6 Oct 2017

See all articles by Trung Nguyen

Trung Nguyen

Harvard Business School

Quoc Nguyen

DePaul University

Date Written: October 5, 2017

Abstract

We use hand-collected data from SEC's litigation releases for insider trading violations to examine the effect of geographic distance on its enforcement activities and insider trading activities. First, we find that the SEC is more likely to investigate companies that are closer to its offices. Second, we find that illegal insider trading increases with a company's distance from an SEC office. Lastly, we utilize the closure of SEC offices as exogenous shocks to geographic proximity and find that insider trading at nearby companies increase significantly compared with trading at otherwise similar companies not affected by the closures. Overall, our findings suggest that information asymmetry and resource constraints prevent regulators from monitoring effectively.

Keywords: SEC; Enforcement; Financial Misconduct; Insider Trading; Geographic Proximity

JEL Classification: K42; G18; G38; M41; M48

Suggested Citation

Nguyen, Trung and Nguyen, Quoc, It is Easy to Be Brave from a Safe Distance: Proximity to the SEC and Insider Trading (October 5, 2017). Available at SSRN: https://ssrn.com/abstract=3048660 or http://dx.doi.org/10.2139/ssrn.3048660

Trung Nguyen

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Quoc Nguyen (Contact Author)

DePaul University ( email )

1 East Jackson Blvd.
Chicago, IL 60604
United States

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