Does institutional monitoring matter? Evidence from insider trading by information risk level

초록

We examine the effects of institutional ownership on insider exploitation of asymmetric information. Because institutional investors monitor firm activities in order to improve the corporate information environment, such monitoring could decrease the intensity of insider trading on private information. We find that large, long-term institutional ownership is negatively and significantly related to the extent of insider trading associated with information risk. This suggests that institutional monitoring mitigates information asymmetry among investors, resulting in lower information risk, thus restricting informed insider trading.

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