| dc.description.abstract | This paper examines the impact of prior crash risk on insider trading behaviour using a
sample of Chinese A-share firms for the 2010-2015 period. Prior crash risk is publicly available
information yet represents a source of informational advantage for insiders due to their unique
capacity to assess its impact on stock price. Consistent with this assertion, we find a positive
correlation between prior crash risk and insider sales value scaled by firm value. This result is
robust to market sentiment and contrarian strategy. The result still holds after accounting for
possible endogeneity issues using a two-stage least squares estimation. Additionally, we find the
relationship is attenuated in state-owned enterprises (SOEs), where corporate governance affects
insider motivation and creates administrative restrictions. Our study contributes to the growing
literature on crash risk consequences by examining its association with insider trading behaviour.
Our results are economically meaningful and feature important implications for investors, boards
of directors, and policymakers. | en_US |
