Insider trading: The role of internal governance and legal regulation

Yu Wang and Shan Zhang

Finance Research Letters, 2025, vol. 76, issue C

Abstract: Insider trading hurts the interest of external investors. Based on A-shared listed firms on the Shanghai Stock Exchange and Shenzhen Stock Exchange throughout 2012 to 2022, this study finds strong evidence that corporate internal governance and legal regulation help lower insider trading behavior. The results are robust to multiple sensitivity analyses. Moreover, we also show that corporate information disclosure is a key economic channel underlying the relationship we identified. Overall, this study contributes to the literature on corporate finance and law by gaining insights into the implications of internal governance and legal regulation for insider trading behavior.

Keywords: Executives; Insider trading; Internal governance; Legal regulation (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:76:y:2025:i:c:s1544612325000546

DOI: 10.1016/j.frl.2025.106789

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