 Does exposure to product market competition influence insider trading profitability?Dewan Rahman, Muhammad Kabir and Barry Oliver Journal of Corporate Finance, 2021, vol. 66, issue C Abstract: We examine whether and how product market competition affects insider trading profitability. We empirically show that the insiders of firms in highly competitive industries make higher abnormal profits. Our identification strategy includes both a quasi-natural experiment setting and an instrumental variable approach to address endogeneity concerns. We also run an extensive array of robustness checks and find that our baseline results remain substantially unchanged. Our cross-sectional analyses show that insider trading profitability is more pronounced for firms with: a higher level of trade secrecy, a higher level of R&D, a lower level of management voluntary disclosures, less readable 10-K reports and highly tone-ambiguous financial disclosures. We also find that our results are robust to the inclusion of corporate governance mechanisms. Overall, this study is consistent with the theoretical predictions that support the information asymmetry and proprietary cost channels of competition and that increases in competition lead insiders to undertake more rent-seeking activity. Keywords: Product market competition; Insider trading; Tariff rate (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:66:y:2021:i:c:s0929119920302364 DOI: 10.1016/j.jcorpfin.2020.101792 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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