Do Commonalities Facilitate Private Information Channels? Evidence from Common Gender and Insider Trading

68 Pages Posted: 1 Jul 2020 Last revised: 7 May 2021

See all articles by Iain Clacher

Iain Clacher

University of Leeds - Leeds University Business School (LUBS)

Beatriz Garcia Osma

Universidad Carlos III de Madrid - Department of Business Administration; European Corporate Governance Institute (ECGI)

Elvira Scarlat

IE Business School, IE University

Karin Shields

University of London - Birkbeck College

Date Written: April 25, 2021

Abstract

We examine insider trading profitability and common identity between insiders and top executives. In particular, we argue that common gender and the resultant social connections it creates influence access to private information, where insiders benefit from greater information sharing with top executives of the same gender. Using a large sample of US firms between 1995 and 2016, we find higher (lower) insider trading profitability for female (male) insiders in the presence of a female CEO or CFO. We also study and find that, in isolation, other social and professional commonalities, such as common age, ethnicity, having attended the same university or having worked at the same firm also increase insider profitability, albeit to a lesser extent. Our evidence suggests that some of these commonalties, when cumulated, enhance the common gender effect. We examine formal interactions and find that attending meetings and serving on committees with top executives of the same gender enables private information sharing, consistent with common gender acting as an informational channel. We also document greater clustering of insiders’ trades around the trades made by common gender top executives. Our findings are consistent with flows of private information from CEOs and CFOs to less informed common gender insiders.

Keywords: Gender, Information Asymmetry, Insider Trading, Social Commonalities

JEL Classification: G14, G34, J16, M41

Suggested Citation

Clacher, Iain and Garcia Osma, Beatriz and Scarlat, Elvira and Shields, Karin, Do Commonalities Facilitate Private Information Channels? Evidence from Common Gender and Insider Trading (April 25, 2021). European Corporate Governance Institute – Finance Working Paper No. 758/2021, Available at SSRN: https://ssrn.com/abstract=3617747 or http://dx.doi.org/10.2139/ssrn.3617747

Iain Clacher

University of Leeds - Leeds University Business School (LUBS) ( email )

Leeds LS2 9JT
United Kingdom

Beatriz Garcia Osma

Universidad Carlos III de Madrid - Department of Business Administration ( email )

Calle Madrid 126
Getafe, Madrid, Madrid 28903
Spain

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Elvira Scarlat (Contact Author)

IE Business School, IE University ( email )

Calle Maria de Molina 12
Madrid, Madrid 28006
Spain

HOME PAGE: http://https://www.ie.edu/business-school/faculty-and-research/faculty/elvira-scarlat/

Karin Shields

University of London - Birkbeck College ( email )

Malet Street
London, London WC1
United Kingdom

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