Abstract
This study examines the relationship between business strategy and the trading profits earned by corporate insiders. Firms following prospector and defender strategies have different objectives and different firm characteristics, which affects the level of information asymmetry that can be used advantageously by insiders. Based on a sample of Chinese-listed firms from 2012 through 2015, we find that the profitability of trading by insiders at prospector firms is higher than the profitability of trading by insiders at defender firms. Additional analyses reveal that this finding is primarily attributed to insider sales and male insider trades and that it is also driven by firms not subject to trade restrictions and family-controlled firms. Identifying business strategies used by firms where insiders' trades are more profitable could be relevant to regulators.
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