The Governance Effect of the Media's News Dissemination Role: Evidence from Insider Trading

2015/01/20 by LILI DAI, Lili Dai, JERRY T. PARWADA +3 · 7 citations
Business, Management and Accounting · Economics, Econometrics and Finance · #Auditing, Earnings Management, Governance #Corporate Finance and Governance #Financial Markets and Investment Strategies

paper · doi:10.1111/1475-679x.12073

Abstract

ABSTRACT We investigate whether the media plays a role in corporate governance by disseminating news. Using a comprehensive data set of corporate and insider news coverage for the 2001–2012 period, we show that the media reduces insiders’ future trading profits by disseminating news on prior insiders’ trades available from regulatory filings. We find support for three economic mechanisms underlying the disciplining effect of news dissemination: the reduction of information asymmetry, concerns regarding litigation risk, and the impact on insiders’ personal wealth and reputation. Our findings provide new insights into the real effect of news dissemination.

Citations

• The Relation Between Insider‐Trading Restrictions and Executive Compensation
• The Press as a Watchdog for Accounting Fraud
• The Role of the Business Press as an Information Intermediary

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• The Impact of Firm's Unethical Behavior in Investment Decisions Among Young Investors in China. [europepmc]
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