Insider trading restrictions and corporate risk-taking

Yuanto Kusnadi

Pacific-Basin Finance Journal, 2015, vol. 35, issue PA, 125-142

Abstract: This paper examines the effect of insider trading restrictions on corporate risk-taking. Using a cross-country sample of 38 countries over the 1990 to 2003 period, we find that corporate risk-taking is positively related to insider trading restrictions. This finding is robust to alternative regression specifications and sample periods, to the use of alternative measures of insider trading restrictions and risk-taking incentives, and to controls for possible endogeneity. Further investigation suggests that the relation between insider trading restrictions and corporate risk-taking is influenced by cross-sectional differences in stock market development and legal origin, and that the increase in risk-taking is beneficial to firms. In conclusion, this paper highlights the role of insider trading restrictions as an important determinant of corporate risk-taking.

Keywords: Insider trading restrictions; Risk-taking incentives; Cross-country study (search for similar items in EconPapers)
JEL-codes: G18 G32 G34 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:35:y:2015:i:pa:p:125-142

DOI: 10.1016/j.pacfin.2014.11.004

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