Tax noncompliance and insider trading |
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| Institution: | 1. University of Oulu, Stockholm School of Economics, Aalto University School of Business;2. Department of Accounting, University of Oulu, P.O. Box 4600, FIN-90014, Finland;3. Department of Accounting, Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden;1. Henry B. Tippie College of Business, University of Iowa, IA, United States;2. Telfer School of Management, University of Ottawa, ON, Canada;3. John Molson School of Business, Concordia University, QC, Canada;1. Shanghai Advanced Institute of Finance, Shanghai Jiaotong University, Shanghai, China;2. Henry B. Tippie College of Business, University of Iowa, Iowa City, IA 52242, United States;1. University of Kansas, Accounting and Information Systems Department, 315-F Summerfield, Lawrence, KS 66045, United States;2. Clemson University, Department of Finance, 421 Sirrine Hall, Clemson, SC 29634, United States;1. The World Bank Group, 10 Marina Boulevard, Marina Bay Financial Center, Singapore 018983, Singapore;2. Wayne State University, 5229 Cass Avenue, 112 Rands Annex, Detroit, MI 48202, United States\n;3. Pennsylvania State University, 380 Business Building, University Park, PA 16802, United States |
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| Abstract: | This paper explores whether insiders who have shown noncompliance with the tax law (‘noncompliant insiders’) are more prone to exploit their information advantage in insider trading, compared to other insiders (‘compliant insiders’). Our empirical results from analyzing archival data of all insider trades in Sweden show that noncompliant insiders use more of their information advantage to trade their insider stocks shortly before significant stock price changes, compared to compliant insiders. These results remain similar after controlling for various insider- and firm-specific determinants of insider returns, including firm and year fixed effects. We believe that our results are of interest for academics and regulatory authorities monitoring and screening insider trading activity. |
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