Insider trading and information asymmetry: Evidence from an emerging market

AbstractDuring the last decades, institutional investors have been the main players, both in developed as well as in emerging stock markets. Thus, their investment behavior was analyzed at the national or international level, in order to assess if institutional investors herd, increase stock return volatility, affect market efficiency and liquidity, influence the corporate governance, or destabilize stock prices. This paper studies the behavior of the institutional investors on the Romanian stock market, a European frontier market that struggles to attain the status of emerging market. We examine if the disclosure level generates any herding behavior for institutional investors. In emerging markets, the lack of transparency affects the degree of investments in a listed company, as long as insider trading is pushed to the limit of the legal line. For this study, we used financial information from the companies listed on the Bucharest Stock Exchange for the period 2010-2014. The findings highlight that there is a certain herding behavior among institutional investors in Romania.

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Effects of Corporate Governance Guidelines on Investors: An Experimental Examination of Bangladeshi Investors’ Decisions

10.26686/wgtn.17060102 ◽

2021 ◽

Author(s):

◽

ATM Tariquzzaman

Keyword(s):

Decision Making ◽

Corporate Governance ◽

Theoretical Model ◽

Insider Trading ◽

Emerging Market ◽

Governance Structure ◽

Developed Countries ◽

Financial Condition ◽

The Impact ◽

Investor Decisions

<p>The main purpose of the study is to examine whether investors assign importance to corporate governance in making investment decisions. The study involves a 2x2x2 between-participant experiment on real investors that examines the effects of corporate governance structure, financial condition and insider trading on individual investor decisions. The findings of this study extend the literature on corporate board practices and investor perceptions by providing evidence from this emerging economy that strong corporate governance has a positive impact on investor decisions. The study also confirms the findings of prior literature that financial condition of a company positively influences investor decisions. Hence, the results provide insights into the effects of strengthening corporate governance guidelines and of variation in financial condition on investor decisions. The study provides evidence that the common occurrence of illegal insider trading in the emerging market of Bangladesh does not appear to impact on investor decision making, unlike in developed countries. The results of this study also contribute to understanding of how the quality of corporate governance impacts on decision making. It appears that governance directly impacts the perceived reliability of financial reports and trust in the board and management and that these factors fully mediate the impact on investor decision making. The theoretical model and instrument developed for this study will be useful for further studies to explore the impact of other corporate governance factors on investor decisions. Furthermore, the theoretical model and instrument will also be useful for further studies in other developed and developing countries, particularly where insider trading is regarded by investors as being a concern and to investigate the impact of other corporate governance factors on investors and financial analysts.</p>

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WHICH IS MORE IMPORTANT TO THE SUCCESS OF AN ACQUISITION; ACQUIRER OR TARGET RESOURCES?

Business And Management Studies An International Journal ◽

10.15295/bmij.v8i3.1497 ◽

2020 ◽

Vol 8 (3) ◽

pp. 2572-2599

Author(s):

Ömer Faruk GENÇ

Keyword(s):

Regression Analysis ◽

Information Asymmetry ◽

Emerging Market ◽

Research Question ◽

Future Research ◽

International Acquisitions ◽

Acquisition Performance ◽

Acquisition Integration

The resources of both acquirers and targets have been studied in terms of the drivers and success of acquisitions. Despite the large number of studies that have been conducted, we still do not know whose resources are more critical to the success of acquisitions. This study aims to examine the role of acquirer and target resources in the success of acquisitions. All acquisitions that took place in Turkey between 1990 and 2017 were analyzed to investigate the research question. The findings of a regression analysis of 425 acquisitions in this emerging market context reveal that acquirer resources are more critical than target resources in acquisition performance. The effects of resources on domestic and international acquisitions are also compared, and it is found that acquirer resources are more critical in domestic acquisitions, whereas target resources are more important in international acquisitions. The implications of these findings are discussed in terms of information asymmetry and post-acquisition integration issues, and directions for future research are suggested.

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LARGE SHAREHOLDERS AND INFORMATION ASYMMETRY IN A TRANSITION ECONOMY–EVIDENCE FROM VIETNAM

The Singapore Economic Review ◽

10.1142/s0217590819500462 ◽

2019 ◽

pp. 1-17 ◽

Cited By ~ 1

Author(s):

XUAN VINH VO

Keyword(s):

Stock Market ◽

Information Asymmetry ◽

Fixed Effects ◽

Transition Economy ◽

Stock Exchange ◽

Emerging Market ◽

Market Development ◽

Stock Market Development ◽

Large Shareholder ◽

Large Shareholders

A growing volume of studies indicate that the information asymmetry problem is a serious issue which significantly hinders stock market development. This problem is more pronounced in emerging markets with weak institutions. The domination of large shareholders in a firm might be a cause of information asymmetry because they are commonly believed to have access to private and value-relevant information. The current paper offers insight into the relationship between multiple large shareholder ownership and stock market information asymmetry in the context of Vietnam, an important emerging market. Employing fixed effects and GMM estimators for a panel data sample of firms listed on the Ho Chi Minh City stock exchange covering the period 2007–2015, the results suggest that the concentration of large shareholder ownership is positively and significantly associated with information asymmetry. This finding has strong implications for policy making process in promoting stock market development.

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Cancellable Insider Trading Plans: An Analysis of SEC Rule 10b5-1*

Review of Financial Studies ◽

10.1093/rfs/hhz035 ◽

2019 ◽

Vol 32 (12) ◽

pp. 4947-4996 ◽

Cited By ~ 2

Author(s):

Stephen L Lenkey

Keyword(s):

Information Asymmetry ◽

Adverse Selection ◽

Insider Trading ◽

Rational Expectations ◽

Portfolio Diversification ◽

Rational Expectations Equilibrium ◽

Optimal Trading ◽

Large Subset ◽

Sufficient Degree ◽

Editorial Decision

Abstract Rule 10b5-1 enables insiders to preplan future trades before becoming informed. Within a strategic rational expectations equilibrium framework, I characterize an insider’s unique optimal trading plan, which balances portfolio diversification against exploitation of the rule’s selective termination option. Because the rule reduces adverse selection and provides insurance against bad outcomes, the rule generally improves welfare for both the insider, who later becomes informed, and uninformed outsiders, provided there exists a sufficient degree of information asymmetry. Eliminating the rule’s selective termination option results in an even greater welfare improvement under a large subset of parametric conditions. Received March 9, 2018; editorial decision January 11, 2019 by Editor Wei Jiang.

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Insider Trading, Earnings Management and Information Asymmetry

SSRN Electronic Journal ◽

10.2139/ssrn.2579295 ◽

2015 ◽

Author(s):

Abu Zakir Md. Rasel Chowdhury ◽

Sabur Mollah ◽

Omar Al Farooque

Keyword(s):

Earnings Management ◽

Information Asymmetry ◽

Insider Trading

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