Publication Type

Journal Article

Version

acceptedVersion

Publication Date

11-2015

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

Discipline

Accounting | Corporate Finance

Research Areas

Corporate Governance, Auditing and Risk Management

Publication

Pacific-Basin Finance Journal

Volume

35

Issue

A

First Page

125

Last Page

142

ISSN

0927-538X

Identifier

10.1016/j.pacfin.2014.11.004

Publisher

Elsevier

Copyright Owner and License

Authors

Comments

Advance Online

Additional URL

https://doi.org/10.1016/j.pacfin.2014.11.004

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