Media can restrict insider trading »

If insiders are aware they are being followed by the media to a larger extent, they are less likely to make discretionary decisions at the costs of shareholders. New ANU research has found the media can have a strong effect in reducing corporate insider share trading by repeating existing information about trades. The ANU study examined more than 1.3 million legal trades by US corporate insiders between 2001 and 2012, with an average trade size of more than $27,000. It found insiders were less likely to make profitable share trades when information about prior trades, already available through regulatory filings, was more widely re-published across the media. "If insiders are aware they are being followed by the media to a larger extent, they are less likely to make discretionary decisions at the costs of shareholders," said lead researcher Dr Lili Dai, from the ANU Research School of Finance, Actuarial Studies and Applied Statistics. The study is the first to investigate the relationship between dissemination of insider share histories and corporate governance outcomes. Company officials can face stiff penalties and even jail if they are found to have traded shares while knowing inside information about their company's performance or future plans which the public and other shareholders do not know.