IDEAS home Printed from https://ideas.repec.org/p/rug/rugwps/11-718.html
   My bibliography  Save this paper

Does High-Quality Corporate Communication Reduce Insider Trading Profitability

Author

Listed:
  • D. VAN GEYT

    ()

  • P. VAN CAUWENBERGE

    ()

  • H. VANDER BAUWHEDE

    ()

Abstract

Manuscript Type: Empirical Research Question/Issue: Using a unique database on insider trading in Belgium, we investigate whether high-quality corporate communication, as proxied by disclosure scores of professional financial analysts, reduces the profitability of insider trading. Research Findings/Insights: We find a significant negative association between corporate communication quality and insider trading profitability. Closer inspection of the different communication channels shows that the quality of press releases and investor relation activities is more relevant in explaining insiders’ abnormal returns than the quality of annual reports and corporate websites. Theoretical/Academic Implications: This study provides evidence that high-quality communication contributes to reducing insider trading profitability and information asymmetry. In addition, the quality of voluntary disclosure channels like press releases and investor relation activities seems to be relatively more effective in reducing information asymmetry than mandatory annual reports. Practitioner/Policy Implications: Our findings demonstrate concrete benefits of high-quality communication. In particular, outside investors benefit from better communication as it creates more of a level playing field between investors. Also, companies benefit from better communication as it reduces information asymmetry, which in turn results in a lower cost of capital.

Suggested Citation

  • D. Van Geyt & P. Van Cauwenberge & H. Vander Bauwhede, 2011. "Does High-Quality Corporate Communication Reduce Insider Trading Profitability," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/718, Ghent University, Faculty of Economics and Business Administration.
  • Handle: RePEc:rug:rugwps:11/718
    as

    Download full text from publisher

    File URL: http://wps-feb.ugent.be/Papers/wp_11_718.pdf
    Download Restriction: no

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rug:rugwps:11/718. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nathalie Verhaeghe). General contact details of provider: http://edirc.repec.org/data/ferugbe.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.