 The effect of voluntary versus mandatory adoption of trading policies on the returns to insider tradesMillicent Chang and Marvin Wee Pacific-Basin Finance Journal, 2016, vol. 38, issue C, 76-87 Abstract: An insider trading policy is a critical aspect of a firm's internal governance which ensures the maintenance of corporate transparency. We examine the effect of trading policies on the returns to trades by corporate insiders over two periods: one where the adoption of a policy is voluntary and another where it is mandatory. In the former, we find that the requirement to notify the firm prior to trading does not result in lower trade returns on days outside the permitted trading windows. Where adoption of a policy is mandatory, trade returns made during the restricted windows are higher and the requirement to notify prior to trading significantly reduces these returns. The mandatory disclosure of a trading policy is effective in reducing returns from insider trading, suggesting improved investor confidence through greater transparency. Keywords: Insider trading policy; Permitted trading periods; Restricted trading periods; Trading returns; Insider holdings; Corporate governance (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:pacfin:v:38:y:2016:i:c:p:76-87 DOI: 10.1016/j.pacfin.2016.03.007 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.