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Insider Trading and Corporate Information Transparency
Author(s) -
Gu Feng,
Li John Q.
Publication year - 2012
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.2012.00345.x
Subject(s) - transparency (behavior) , insider trading , insider , business , private information retrieval , profitability index , information asymmetry , stock price , inside information , accounting , finance , computer security , computer science , law , paleontology , series (stratigraphy) , political science , biology
Our study examines the relation between insider trading and corporate information transparency. We find a negative relation between firms’ information transparency and the economic significance of insider trading, including the amount of insider purchase and sale and the profitability of insider transactions. We also find a negative relation between information transparency and stock price reaction to news of insider trading, which suggests that increases in information transparency preempt insiders’ private information. Our study provides evidence consistent with firms’ transparency‐enhancing activities decreasing information asymmetry between insiders and investors by revealing insiders’ private information to investors in a timely manner.