Work

Does stronger corporate governance constrain insider trading? Asymmetric evidence from Australia

Year: 2018

Type: article

Abstract: We investigate the role of internal corporate governance in limiting opportunities for ASX company ‘insiders’ to extract abnormal returns from trading ‘own shares’. We show that stronger governance translates into more restrictive insider trading policies and, while not resulting in lower insider purchase volumes, values or profits, it does reduce insider selling profitability. Firm size and increasing trading policy restrictiveness is associated with reduced insider purchase profitability while insider sale profitability is reduced by aggregate governance, trading restrictions and increasing trading policy restrictiveness. We conclude that internal firm governance constrains insider sales but not purchases, providing contrarian trading signals.

Source: Accounting and Finance

DOI: 10.1111/acfi.12423

Authors: Allan Hodgson, Michael Seamer, Katherine Uylangco

Institutions: The University of Queensland, University of Newcastle Australia, Queensland University of Technology

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: green

OpenAlex ID: W2902901612