Does Cross-Listing Mitigate Insider Trading?

48 Pages Posted: 17 Mar 2008

See all articles by Adriana Korczak

Adriana Korczak

University of Bristol

Meziane Lasfer

Bayes Business School, City, University of London

Date Written: January 4, 2008

Abstract

This paper examines whether the increased legal and reputational constraints associated with cross-listing in the U.S. reduces the propensity of insiders to trade on private information. We find that the directors in both domestic and cross-listed firms trade on private information, particularly when they sell their holdings, as their trades generate negative and significant abnormal returns regardless of the cross-listing level, and the post-event returns in exchange-listed and OTC-listed firms where the regulation is expected to be less binding are relatively similar. We also show that the impact of the Sarbanes-Oxley Act (SOX) is limited. These results provide weak evidence for the impact of cross-listing on the propensity of insiders to trade on private information.

Keywords: Legal and reputational bonding, directors' trades, international cross-listing, information asymmetry

JEL Classification: G14, G15, G18, G34, G38, K42

Suggested Citation

Korczak, Adriana and Lasfer, Meziane, Does Cross-Listing Mitigate Insider Trading? (January 4, 2008). Available at SSRN: https://ssrn.com/abstract=1102130 or http://dx.doi.org/10.2139/ssrn.1102130

Adriana Korczak (Contact Author)

University of Bristol ( email )

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Meziane Lasfer

Bayes Business School, City, University of London ( email )

106 Bunhill Row
London, EC1Y 8TZ
Great Britain
+44 20 7040 8634 (Phone)
+44 20 7040 8881 (Fax)

HOME PAGE: http://https://www.bayes.city.ac.uk/faculties-and-research/experts/meziane-lasfer

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