Does Corporate Governance Quality Influence Private In-House Meeting Frequency and Insider Trading?

60 Pages Posted: 19 Feb 2020

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

East China University of Science and Technology (ECUST)

PengCheng Zhu

University of San Diego

Date Written: January 20, 2020

Abstract

We examine the effectiveness of corporate governance in monitoring private in-house meetings between management and investors. Consistent with better corporate governance curbing the opportunistic corporate disclosure and insider trading behavior, we find a negative association between governance quality and (i) private in-house meeting frequency, (ii) reduced insider trading frequency and value around private in-house meetings, and (iii) reduced insider trading profitability around these meetings. We document a potential channel that may explain these findings. Particularly, we find that firms with better corporate governance tend to reduce leakage of price-sensitive information during private in-house meetings, which limits the opportunity to make profitable insider trades. Our results are 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 negative consequences of private in-house 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 Zhu, Phil, Does Corporate Governance Quality Influence Private In-House Meeting Frequency and Insider Trading? (January 20, 2020). 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

Phil Zhu

University of San Diego ( email )

5998 Alcala Park
San Diego, CA 92110
United States

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