Does corporate governance quality influence insider trading around private meetings between managers and investors?

52 Pages Posted: 19 Feb 2020 Last revised: 3 Jul 2022

See all articles by Robert M. Bowen

Robert M. Bowen

Chapman University - The George L. Argyros School of Business & Economics; University of Washington - Foster School of Business

Shantanu Dutta

The University of Ontario Institute of Technology (UOIT)

Songlian Tang

CUNY Baruch College; East China University of Science and Technology (ECUST)

PengCheng Zhu

University of San Diego

Date Written: June 23, 2022

Abstract

We examine the effectiveness of corporate governance in influencing insider trading around private in-house meetings (hereafter “private meetings”) between management and investors in China. Consistent with better corporate governance curbing (i) disclosure of non-public price-sensitive information and (ii) insider trading, we find that better governance quality is associated with reduced insider trading frequency, value, and profitability around private meetings. Firms with better corporate governance appear to exchange less price-sensitive information with outsider investors around private meetings, which limits the opportunity to make profitable insider trades. Our results are economically significant and robust using instrumental variable and propensity score matching approaches to address endogeneity. We argue that improving corporate governance quality may be a partial substitute for costly government regulation designed to curb insider trading around private meetings.

Keywords: private in-house meetings, site visits, corporate governance, disclosure, insider trading, fair disclosure regulation, China

JEL Classification: G34; G14; G18

Suggested Citation

Bowen, Robert M. and Dutta, Shantanu and Tang, Songlian and Tang, Songlian and Zhu, Phil, Does corporate governance quality influence insider trading around private meetings between managers and investors? (June 23, 2022). Available at SSRN: https://ssrn.com/abstract=3524533 or http://dx.doi.org/10.2139/ssrn.3524533

Robert M. Bowen (Contact Author)

Chapman University - The George L. Argyros School of Business & Economics ( email )

333 N. Glassell
Orange, CA 92866
United States
206.334.0911 (Phone)

HOME PAGE: http://www.chapman.edu/our-faculty/robert-bowen

University of Washington - Foster School of Business ( email )

Box 353226
University of Washington
Seattle, WA 98195-3226
United States
206.334.0911 (Phone)

HOME PAGE: http://foster.uw.edu/faculty-research/directory/robert-bowen/

Shantanu Dutta

The University of Ontario Institute of Technology (UOIT) ( email )

2000 Simcoe Street North
Oshawa, Ontario L1H 7K4
Canada

Songlian Tang

East China University of Science and Technology (ECUST) ( email )

Shanghai
China

CUNY Baruch College ( email )

17 Lexington Avenue
New York, NY 10021
United States

Phil Zhu

University of San Diego ( email )

5998 Alcala Park
San Diego, CA 92110
United States

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