Religion and insider trading profits

Harold Contreras, Adriana Korczak and Piotr Korczak

Journal of Banking & Finance, 2023, vol. 149, issue C

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 profits, those insiders are less likely to trade on future earnings news, and their trades are less likely to be opportunistic. The effect of religion on profitability of insider trading holds across different levels of disclosure environments and is more pronounced in firms with poor corporate governance. Overall, we offer new insights into the effect of social norms on individuals’ financial decisions.

Keywords: Religion; Social norms; Insider trading; Profits; Opportunism; Corporate governance (search for similar items in EconPapers)
JEL-codes: G14 G41 Z12 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:149:y:2023:i:c:s0378426623000183

DOI: 10.1016/j.jbankfin.2023.106778

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