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The role of board gender on the profitability of insider trading

Author

Listed:
  • Tian Zhong
  • Robert Faff
  • Allan Hodgson
  • Lee J. Yao

Abstract

Purpose - – The purpose of this paper is to examine the impact of female board membership on the profitability of corporate insider purchases. Design/methodology/approach - – The authors use a classic event study approach. They measure abnormal returns around the insider purchase events, and analyze the cross-sectional variation of this market impact in terms of female board membership, controlling for a range of other factors. Findings - – The authors find a strong positive market reaction in the aggregated data, and after decomposing transactions according to gender, they find that the profitability of female directors is statistically indistinguishable from their male counterparts. Additionally, they find evidence that with more females sitting on the board, the profitability of the male directors decreases but the profitability of their female counterparts does not. Originality/value - – The authors’ findings suggest that having females on the board increases corporate governance of male directors. The results also suggest that female directors are no less inclined to exploit the asymmetric information advantage provided by board membership.

Suggested Citation

  • Tian Zhong & Robert Faff & Allan Hodgson & Lee J. Yao, 2014. "The role of board gender on the profitability of insider trading," International Journal of Accounting & Information Management, Emerald Group Publishing Limited, vol. 22(3), pages 180-193, July.
    • Handle: RePEc:eme:ijaimp:v:22:y:2014:i:3:p:180-193
    DOI: 10.1108/IJAIM-03-2013-0020
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    More about this item

    Keywords

    Corporate governance; Insider trading; Board gender; G14; G34;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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