Insider Trading and Networked Directors

52 Pages Posted: 5 Sep 2018

See all articles by Marc Goergen

Marc Goergen

IE Business School, IE University; European Corporate Governance Institute (ECGI)

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Yang Zhao

Newcastle University

Date Written: September 2018

Abstract

We analyze the relation between insider trading and the networks of executive and non-executive directors in UK listed companies. While most existing studies focus on firm-specific private information, we find that non-firm-specific information - such as information on other companies and information on industry and market trends - plays an important role in insider trading behaviour and performance. Well-connected directors trade shares less frequently and for smaller values. However, their transactions are more profitable, especially when they make consecutive opportunistic purchases in multiple companies on whose boards they sit. Taken together, well-connected directors are likely to outperform their peers with inferior networks.

Keywords: Insider Trading, Director Networks, Network Analysis, Centrality, Opportunistic Trading, Routine Trading

JEL Classification: G14, G34, G39

Suggested Citation

Goergen, Marc and Renneboog, Luc and Zhao, Yang, Insider Trading and Networked Directors (September 2018). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 573/2018. Available at SSRN: https://ssrn.com/abstract=3229606 or http://dx.doi.org/10.2139/ssrn.3229606

Marc Goergen

IE Business School, IE University ( email )

Finance Department
Maria de Molina, 12
Madrid, 28006
Spain

HOME PAGE: http://www.ie.edu/business-school/faculty-and-research/faculty/marc-goergen/

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Luc Renneboog (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Yang Zhao

Newcastle University ( email )

5 Barrack Road
Devonshire Building
NEWCASTLE UPON TYNE, NE1 7RU
United Kingdom

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