Do voluntary corporate restrictions on insider trading eliminate informed insider trading?

Inmoo Lee, Michael Lemmon, Yan Li and John M. Sequeira

Journal of Corporate Finance, 2014, vol. 29, issue C, 158-178

Abstract: We investigate whether voluntary corporate restrictions on insider trading effectively prevent insiders from exploiting their private information. Our results show that insiders of firms with seeming restrictions on insider trading continue to take advantage of positive private information while being more cautious when exploiting negative private information. The results suggest that insiders continue to exploit their informational advantages in a way that minimizes their legal risk. We also find that the degree of information asymmetry is significantly lower in firms with restriction policies and that corporate governance significantly affects firms' decisions to adopt these policies.

Keywords: Corporate governance; Information asymmetry; Insider trading; Profitability of insider trading; Voluntary corporate restrictions (search for similar items in EconPapers)
JEL-codes: G30 G34 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:29:y:2014:i:c:p:158-178

DOI: 10.1016/j.jcorpfin.2014.07.005

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