Judge Ideology and Opportunistic Insider Trading

44 Pages Posted: 26 Oct 2021 Last revised: 29 Oct 2021

See all articles by Allen Huang

Allen Huang

Hong Kong University of Science and Technology - Department of Accounting

Kai Wai Hui

The University of Hong Kong (HKU) - Department of Accounting

Yue Zheng

Hong Kong University of Science & Technology (HKUST)

Date Written: October 29, 2021

Abstract

Extant evidence suggests that liberal judges prefer stricter securities enforcement to protect innocent investors. We find that firms located in circuits with more liberal judges perform fewer opportunistic insider sales, consistent with managers taking judges’ political ideology into consideration. This deterrent effect is stronger when insiders are more likely to be sued. The SEC also considers judge ideology when selecting litigation venues. Finally, we validate that liberal judges are associated with heavier penalties in insider trading cases. Overall, we provide the first evidence demonstrating the importance of judicial discretion and judge political ideology in deterring opportunistic insider trading.

Keywords: Judge ideology; opportunistic insider trading; federal judiciary; Securities and Exchange Commission; forum shopping

JEL Classification: G14, K22, K41, K42

Suggested Citation

Huang, Allen and Hui, Kai Wai and Zheng, Yue, Judge Ideology and Opportunistic Insider Trading (October 29, 2021). Available at SSRN: https://ssrn.com/abstract=3947898 or http://dx.doi.org/10.2139/ssrn.3947898

Allen Huang (Contact Author)

Hong Kong University of Science and Technology - Department of Accounting ( email )

LSK Business School Building
HKUST
Clear Water Bay, Kowloon
Hong Kong

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

Kai Wai Hui

The University of Hong Kong (HKU) - Department of Accounting ( email )

Pokfulam Road
Hong Kong, Pokfulam
Hong Kong

Yue Zheng

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
44
Abstract Views
151
PlumX Metrics