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Political network and muted insider trading

Author

Listed:
  • Chen, Wei
  • Gu, Xian
  • Hasan, Iftekhar
  • Zhao, Hao
  • Zhu, Yun

Abstract

This paper examines how political networks influence insider trading in China. Using biographical data to construct chairman–politician social networks, we find that firms with stronger political networks engage in significantly less insider trading. The effect is stronger for non-state-owned enterprises (non-SOEs) and for long-standing or high-ranking connections. The muted trading persists during periods when insiders possess valuable private information, including prior to M&A announcements and major policy events. The evidence suggests that personal political networks function as informal governance mechanisms that discipline managerial opportunism when formal governance through state ownership is absent.

Suggested Citation

  • Chen, Wei & Gu, Xian & Hasan, Iftekhar & Zhao, Hao & Zhu, Yun, 2026. "Political network and muted insider trading," Journal of Corporate Finance, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:corfin:v:99:y:2026:i:c:s0929119926000659
    DOI: 10.1016/j.jcorpfin.2026.103007
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    Keywords

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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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