Corporate insider trading: A literature review

The last three decades have seen the issue of corporate insider trading come to the fore. With the emergence of corporate governance as a central concern to regulators and academics, the trading activity of corporate insiders neatly spans both governance and corporate finance policy areas. This review article synthesises the main ideas and the most important empirical research in corporate insider trading. Since regulation is the main backdrop to insider trading, the current law facing European corporations is also discussed. Finally, the review concludes by providing an insight into the future direction of research in corporate insider trading

Institutional shareholder activism and limited investor attention

We investigate whether limited investor attention is a factor in the effectiveness of institutional shareholder activism. Prior research has shown that an inability of market participants to allocate sufficient intellectual effort to the investment decision can have an impact on market price and volume behavior. We extend this research in an applied setting by considering the effectiveness of the California Public Employees' Retirement System (CalPERS) focus list, whose aim is to improve the performance and corporate governance of target firms. We find that the share price and volume response to being included in the focus list is a function of the investor attention in a stock, which in turn has an impact on the subsequent managerial response. This suggests that when attention is a scarce cognitive resource, the proactive exploitation of news signals can be an efficient activism strategy

Accounting window dressing and template regulation: A case study of the Australian credit union industry

This article documents the response of cooperative institutions that were required to adhere to new capital adequacy regulations traditionally geared for profit-maximising organisations. Using data from the Australian credit union industry, we demonstrate that the cooperative philosophy and internal corporate governance structure of cooperatives will lead management to increase capital adequacy ratios through the application of accounting window dressing techniques. This is opposite to the intended purpose of template regulation aimed at efficiently increasing operating margins and lowering risk. Our results raise several debatable issues regarding the ethics of accounting management and the imposition of one-shoe-fits-all external regulation