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How information structure shapes insider valuation bias: Evidence from insider selling in China

Author

Listed:
  • Ding, Zhiguo
  • Liu, Xinmiao
  • Ding, Yuyang

Abstract

In capital markets characterized by information asymmetry, insiders' valuation and trading vary with their information structures. Using insider selling data from China's A-share listed firms, this paper examines how information structure affect insiders' valuation from the perspectives of information economics and behavioral finance. Drawing on empirical evidence from two dimensions, behavioral motivation and market outcomes, we find that insiders with only operational information tend to undervalue their companies, sell more aggressively, and fail to achieve long-term abnormal returns. In contrast, board-level decision information mitigates such biases, leading to more accurate valuations, more prudent selling, and better long-term performance. Further analysis shows that female insiders and those with shorter tenures display stronger undervaluation under incomplete information, indicating that individual traits can amplify the effect of information structure on valuation bias.

Suggested Citation

  • Ding, Zhiguo & Liu, Xinmiao & Ding, Yuyang, 2025. "How information structure shapes insider valuation bias: Evidence from insider selling in China," Finance Research Letters, Elsevier, vol. 85(PD).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pd:s1544612325014618
    DOI: 10.1016/j.frl.2025.108206
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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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