Abstract
This study examines the relationship between illegal insider trading and corporate governance. We analyze a sample of 156 cases: seventy-eight firms having illegal insider trading episodes and seventy-eight matched firms. We use three main factors—board composition, ownership structure, and financial reporting credibility—as well as other variables to measure corporate governance. The results reveal that CEO duality and domestic investors are significantly and negatively correlated with illegal insider trading. In addition, firms with less financial reporting credibility have a higher probability of illegal insider trading. Our evidence also supports the view that firms with financial troubles are more likely to engage in illegal insider trading.
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