Does common ownership constrain managerial rent extraction? Evidence from insider trading profitability |
| |
| Institution: | 1. School of Economics, Zhejiang University of Technology, China;2. Institute of Accounting and Finance, Shanghai University of Finance and Economics, China;3. School of Accounting and Finance, Hong Kong Polytechnic University, China;4. Saunders College of Business, Rochester Institute of Technology, United States;1. Lingnan College, Sun Yat-sen University, China;2. Business School, Sichuan University, China;1. School of Finance, Jiangxi University of Finance and Economics, China;2. School of Management, Shandong University, China;3. School of Economics and Finance, Massey University, New Zealand;1. Oslo Business School, Oslo Metropolitan University, Pilestredet 46, Oslo 0130, Norway;2. School of Accountancy, Jiangxi University of Finance and Economics, Nanchang, Jiangxi, China;3. Faculty of Business and Economics, the University of Melbourne, Melbourne, VIC, Australia;4. The Arctic University of Norway, Hansine Hansens veg 18, Tromsø N-9019, Norway;5. College of Business and Economics, Australian National University, Canberra, ACT, Australia |
| |
| Abstract: | This study identifies a new economic benefit of common institutional ownership, which refers to the increasingly contentious phenomenon of U.S. firms sharing stockholders with their industry competitors. We find a significantly negative relation between common ownership and insider trading profitability. The disciplinary effect of common ownership on opportunistic insider trading is particularly evident when the information effects of common ownership are greater, when common owners are more likely to benefit from positive governance externalities, and in the subset of trades made by opportunistic insiders. Using the exogenous variations in common ownership induced by financial institution mergers, we conduct a difference-in-differences analysis and find consistent results. We also provide evidence that common owners encourage firms to impose ex-ante restrictions on insider trading and take ex-post actions to discipline opportunistic insiders by voting against management. Overall, our findings suggest that common institutional shareholders have information advantages, governance incentives, and effective means to constrain opportunistic insider trading. |
| |
| Keywords: | |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
