Abstract
Restricting insider trading enhances price informativeness for managers by encouraging investors to acquire and trade on private information. Therefore, corporate investment should be more sensitive to stock prices and more efficient as stock prices provide more precise information to guide investment decisions. Consistent with this hypothesis, the investment-to-price sensitivity increases significantly after a country’s initial enforcement of insider trading laws. The increase is positively associated with the enhancement of price informativeness for the managers and the increase in trading intensity around the enforcement. Accounting performance is also improved after the enforcement and the improvement is generally positively associated with the increase in the investment-to-price sensitivity.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
