 Corruption and insider tradingKyriacos Kyriacou, Siming Liu and Bryan Mase Journal of Corporate Finance, 2024, vol. 89, issue C Abstract: We investigate firm corruption in China by extracting a measure of corruption from published financial statements and use this to demonstrate that corruption impacts the trading decisions of insiders. Specifically, we show that insiders in firms that are more corrupt trade more aggressively, and they are more willing to trade on their private information as evidenced by the increased informativeness of their trades, in respect of both purchases and sales. This link between firm corruption and trade informativeness is robust to the inclusion of a number of factors that are known to influence the informativeness of such trades, including trade characteristics, insider characteristics and the firm's information environment. We also consider the effect of the appointment of a new CEO or Chair. Overall, corruption related trade informativeness holds consistently for both purchases and sales. Finally, we show that this measure of corruption is robust to the inclusion of several alternative indicators of corporate misconduct. Keywords: Corruption; Insider trading; Entertainment and travel costs (ETC); Abnormal returns; Stochastic frontier analysis (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:89:y:2024:i:c:s0929119924001160 DOI: 10.1016/j.jcorpfin.2024.102654 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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