Accounting Seminar（2016-18）

Topic: Shareholder Litigation and Insider Trading

Speaker: Xu Li, The University of Hong Kong

Time: Wednesday, Dec.14, 10:00-11:30

Place: Room217, Guanghua Building 1

Abstract:

Lucrative insider trading is prevalent and can be driven by information advantage, but how to effectively regulate insider trading is still open to debate. In this paper, we examine how shareholder litigation shapes insider trading profit, exploiting the exogenous reduction in litigation threat generated by the 1999 ruling of the Ninth Circuit Court of Appeals. We find that following the ruling, relative to firms in other circuits, the treated firms in the Ninth Circuit states made more profits from insider trading, especially from insider sales and opportunistic sales. This effect is more profound for firms with high exposure to shareholder litigation. We further show that the results are insensitive to a battery of robustness checks, such as controlling for insider fixed effects and time trends, excluding high-tech, Internet, and IPO firms from the sample, and using a sample matched on industry and firm characteristics.

Introduction:

Dr. Li, Xu is an associate professor of accounting. He obtained his Bachelor’s degree in International Business Administration from University of International Business and Economics, the Master’s degree in Finance from Boston College, and the PhD degree in accounting from Massachusetts Institute of Technology. Prior to joining University of Hong Kong, Dr. Li worked in University of Texas at Dallas and Lehigh University.

Research interests include the capital market’s reaction on accounting information, information intermediaries, insider trading and information asymmetry, characteristics and impact of firms’ disclosure, institutional investors’ trading behavior.

//www.fbe.hku.hk/academic-areas/accounting/detail/xu-li

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