Abstract
ABSTRACT Motivated by the social network theories, we examine whether and how shareholder networks affect insider trading. We find that shareholder networks negatively affect insider trading based on a sample of Chinese listed firms from 2009 to 2019. Our results suggest that improving stock pricing efficiency and strengthening corporate governance are two channels through which shareholder networks negatively affect insider trading. Cross-sectional tests show that the relation is more pronounced in firms that have weaker legal environments and less investor attention. Furthermore, expanding shareholder networks attenuates the profitability of insider trading.
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