Work

Common institutional ownership and M&A insider trading: Governance or collusion?

Year: 2025

Type: article

Abstract: Merger and acquisition (M&A) transactions are highly information sensitive, frequently making them insider trading targets, which undermines market fairness and stability. This paper examines how common institutional ownership affects insider trading in M&A through a 2010 to 2023 analysis of Chinese listed firms. The findings reveal that common institutional ownership significantly reduces insider trading during M&A events, thereby supporting the governance perspective of institutional investors. Mechanism analysis indicates that this effect functions by diminishing insiders' information advantages and enhancing internal controls. Moreover, the mitigating effect is more pronounced in firms with higher information asymmetry, lower investor attention, and greater insider ownership. This study contributes to the literature on institutional investor governance and offers critical insights for emerging markets aiming to mitigate illegal insider trading, optimize institutional ownership structures, and enhance regulatory frameworks.

Source: Borsa Istanbul Review

DOI: 10.1016/j.bir.2025.07.015

Authors: Fangfang Zhou, Yu Cheng

Institution: Southeast University

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: gold

Estimated APC paid: $1,500