Religion and insider trading profits

We use the controversial aspect of insider trading to analyze the impact of local social norms on insiders’ profits. We argue that religiosity is a source of social norms curbing self-interested behavior and, accordingly, it limits corporate insiders’ opportunistic trading on private information. Ou...

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Bibliographic Details
Published inJournal of banking & finance Vol. 149; p. 106778
Main Authors Contreras, Harold, Korczak, Adriana, Korczak, Piotr
Format Journal Article
LanguageEnglish
Published Elsevier B.V 01.04.2023
Subjects
Corporate governance
Insider trading
Opportunism
Profits
Religion
Social norms
Insider trading
Corporate governance
G41
Religion
Profits
Z12
G14
Opportunism
Social norms
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Summary:We use the controversial aspect of insider trading to analyze the impact of local social norms on insiders’ profits. We argue that religiosity is a source of social norms curbing self-interested behavior and, accordingly, it limits corporate insiders’ opportunistic trading on private information. Our results confirm that trades by insiders in firms located in more religious areas are followed by lower profits, those insiders are less likely to trade on future earnings news, and their trades are less likely to be opportunistic. The effect of religion on profitability of insider trading holds across different levels of disclosure environments and is more pronounced in firms with poor corporate governance. Overall, we offer new insights into the effect of social norms on individuals’ financial decisions.
ISSN:0378-4266
1872-6372
DOI:10.1016/j.jbankfin.2023.106778