Publication Type
Journal Article
Version
submittedVersion
Publication Date
5-2023
Abstract
In this study, we examine whether the social capital surrounding the firm’s corporate headquarters mitigates managerial self-dealing in the form of opportunistic insider trading. We find strong evidence that the level of social capital in the region surrounding the firm’s headquarters is negatively and significantly associated with insider trading profitability. We also find that the negative association between social capital and insider trading profitability is more pronounced when governance is weaker and corporate opacity is higher, instances where insiders have greater opportunities to trade on their private information. Further analyses on the potential mechanisms suggest that the negative association is stronger when the firm’s social networks are denser and when the civic norms in the region are stronger. Overall, our paper contributes to the growing social capital literature in accounting and finance by providing direct empirical evidence that social capital mitigates managerial self-serving behavior in the form of opportunistic insider trading.
Keywords
Social capital, insider trading, managerial opportunism, information environment
Discipline
Accounting | Corporate Finance
Research Areas
Corporate Governance, Auditing and Risk Management
Publication
Journal of Accounting, Auditing and Finance
ISSN
0148-558X
Identifier
10.1177/0148558X231167202
Publisher
SAGE Publications (UK and US)
Citation
LEE, Kiat Bee Jimmy; LEE, Jimmy; and PARK, Sang Hyun.
Does social capital mitigate managerial self-dealing? Evidence from insider trading. (2023). Journal of Accounting, Auditing and Finance.
Available at: https://ink.library.smu.edu.sg/soa_research/2027
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1177/0148558X231167202