Religion and Insider Trading Profits

53 Pages Posted: 9 Aug 2019 Last revised: 13 Oct 2020

See all articles by Harold Contreras

Harold Contreras

Faculty of Economics and Business - University of Chile

Adriana Korczak

University of Bristol - School of Economics, Finance and Management

Piotr Korczak

University of Bristol - Department of Finance and Accounting

Date Written: October 12, 2020

Abstract

We use the controversial aspect of insider trading to analyze the impact of local social norms on insiders’ profits. We argue that religiosity is a source of social norms curbing self-interested behavior and, accordingly, it limits corporate insiders’ opportunistic trading on private information. Our results confirm that trades by insiders in firms located in more religious areas are followed by lower abnormal returns, those insiders are less likely to trade on future earnings news, and their trades are less likely to be opportunistic. The effect is concentrated where the impact of local social norms is expected to be stronger – in geographically focused firms and in trades by officers. Higher religiosity decreases also the probability and volume of trading. We provide several tests to address potential endogeneity and to strengthen identification. Overall, we offer new insights into the effect of social norms on individuals’ financial decisions.

Keywords: religion, social norms, insider trading, profits, opportunism

JEL Classification: G14, G41, Z12

Suggested Citation

Contreras, Harold and Korczak, Adriana and Korczak, Piotr, Religion and Insider Trading Profits (October 12, 2020). Available at SSRN: https://ssrn.com/abstract=3433059 or http://dx.doi.org/10.2139/ssrn.3433059

Harold Contreras

Faculty of Economics and Business - University of Chile ( email )

Universidad de Chile
Diagonal Paraguay 257
Santiago
Chile

Adriana Korczak

University of Bristol - School of Economics, Finance and Management ( email )

8 Woodland Road
Bristol, BS8 1TN
United Kingdom
+441173941490 (Phone)

Piotr Korczak (Contact Author)

University of Bristol - Department of Finance and Accounting ( email )

8 Woodland Road
Bristol BS8 1TN
United Kingdom
+44 117 394 1491 (Phone)

HOME PAGE: http://sites.google.com/view/piotrkorczak/home

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
123
Abstract Views
997
rank
257,254
PlumX Metrics