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Culture and the regulation of insider trading across countries

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  • Cline, Brandon N.
  • Williamson, Claudia R.
  • Xiong, Haoyang

Abstract

We find that individualistic countries regulate insider trading activities more intensely. The result is robust to controlling for alternative culture variables, additional controls, and instrumental variable analysis. We also document that individualism's effect is magnified in democratic countries. In addition, we study the economic and financial consequences of individualism, insider trading regulation, and its enforcement. The analysis suggests that individualism and the enforcement of insider trading regulation promote financial development. Interaction effects reveal that individualism and insider trading regulation serve as complements to promote financial development. These findings contribute to the insider trading debate since regulation alone may not be the primary determinant of market efficiency. Combined, our results challenge prior works concluding that individualism is anti-regulation.

Suggested Citation

  • Cline, Brandon N. & Williamson, Claudia R. & Xiong, Haoyang, 2021. "Culture and the regulation of insider trading across countries," Journal of Corporate Finance, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:corfin:v:67:y:2021:i:c:s0929119921000389
    DOI: 10.1016/j.jcorpfin.2021.101917
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    More about this item

    Keywords

    Insider trading; Culture; Individualism; Regulation;
    All these keywords.

    JEL classification:

    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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