Delinquent Insider Trade Reporting and Corporate Misconduct
51 Pages Posted: 3 Jan 2024
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Delinquent Insider Trade Reporting and Corporate Misconduct
Delinquent Insider Trade Reporting and Corporate Misconduct
Date Written: September 29, 2024
Abstract
Delinquent insider trade reporting is a violation of securities law. Although these violations may seem minor, they indicate a broader culture of firm noncompliance, which can lead to other forms of misconduct. Using a panel dataset of 18,567 firm-year observations, we find a significant positive relation association between insider filing violations and future corporate misconduct. This effect is strongest for firms with a weak internal oversight system, proxied by firms that do not have a Chief Compliance Officer (CCO) or a voluntary restriction on blackout trading. These findings suggest that implementing a strong internal regulatory system fosters a culture of compliance and establishes checks and balances within the firm.
Keywords: Insider Trading Filing Violations, Corporate Misconduct, Corporate Culture, Governance
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