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Culture and the regulation of insider trading across countries

Brandon N. Cline, Claudia Williamson Kramer and Haoyang Xiong

Journal of Corporate Finance, 2021, vol. 67, issue C

Abstract: We find that individualistic countries regulate insider trading activities more intensely. The result is robust to controlling for alternative culture variables, additional controls, and instrumental variable analysis. We also document that individualism's effect is magnified in democratic countries. In addition, we study the economic and financial consequences of individualism, insider trading regulation, and its enforcement. The analysis suggests that individualism and the enforcement of insider trading regulation promote financial development. Interaction effects reveal that individualism and insider trading regulation serve as complements to promote financial development. These findings contribute to the insider trading debate since regulation alone may not be the primary determinant of market efficiency. Combined, our results challenge prior works concluding that individualism is anti-regulation.

Keywords: Insider trading; Culture; Individualism; Regulation (search for similar items in EconPapers)
JEL-codes: F55 K22 O17 Z10 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jcorpfin.2021.101917

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