We examine the effectiveness of corporate governance in influencing insider trading around private in-house meetings (hereafter “private meetings”) between management and investors in China. Consistent with better corporate governance curbing (i) disclosure of non-public price-sensitive information and (ii) insider trading, we find that better governance quality is associated with reduced insider trading frequency, value, and profitability around private meetings. Firms with better corporate governance appear to exchange less price-sensitive information with outsider investors around private meetings, which limits the opportunity to make profitable insider trades. Our results are economically significant and robust using instrumental variable and propensity score matching approaches to address endogeneity. We argue that improving corporate governance quality may be a partial substitute for costly government regulation designed to curb insider trading around private meetings.
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Research Article|
July 19 2022
Does corporate governance quality influence insider trading around private meetings between managers and investors?
Robert M. Bowen
;
Robert M. Bowen
Chapman University
Professor
Accounting
One University Drive
The George L. Argyros School of Business & Economics
UNITED STATES
Orange
CA
92866
2063340911
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Shantanu Dutta;
Shantanu Dutta
Telfer School of Management, University of Ottawa
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Songlian Tang;
Songlian Tang
School of Business, East China University of Science and Technology
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Pengcheng Zhu
Pengcheng Zhu
School of Business, University of San Diego
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Received:
November 09 2020
Revision Received:
March 09 2022
Revision Received:
June 23 2022
Accepted:
July 01 2022
Online Issn: 1558-7975
Print Issn: 0888-7993
Funding
Funding Group:
- Award Group:
- Funder(s): Social Sciences and Humanities Research Council
- Award Id(s): 435-2018-1510
- Principal Award Recipient(s):
- Funder(s):
- Award Group:
- Funder(s): National Natural Science Foundation of China
- Award Id(s): 71672059
- Principal Award Recipient(s):
- Funder(s):
2022
Accounting Horizons (2022)
Citation
Robert M. Bowen, Shantanu Dutta, Songlian Tang, Pengcheng Zhu; Does corporate governance quality influence insider trading around private meetings between managers and investors?. Accounting Horizons 2022; https://doi.org/10.2308/HORIZONS-2020-184
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