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Insider trading and networked directors

Marc Goergen, Luc Renneboog and Yang Zhao

Journal of Corporate Finance, 2019, vol. 56, issue C, 152-175

Abstract: We analyze the relation between insider trading and the networks of executive and non-executive directors in UK listed companies. While most existing studies focus on firm-specific private information, we find that non-firm-specific information – such as information on other companies and information on industry and market trends – plays an important role in insider trading behavior and performance. Well-connected directors trade shares less frequently and for smaller values. However, their transactions are more profitable, especially when they make consecutive opportunistic purchases in the multiple companies on whose boards they sit. Taken together, well-connected directors are likely to outperform their peers with inferior connections.

Keywords: Insider trading; Director networks; Network analysis; Centrality; Opportunistic trading; Routine trading (search for similar items in EconPapers)
JEL-codes: G14 G34 G39 (search for similar items in EconPapers)
Date: 2019
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