Does Firms' Commitment to Doing Social Good Reduce Insider Trading?

What is it about?

Corporate social responsibility (CSR) has received growing attention from regulators, corporate executives, investors, and various other stakeholders in recent years. In this study, we examine the association between these increasingly important corporate activities of committing to social good and executive insider trading, an action commonly perceived as self-serving.

Featured Image

Why is it important?

We find that executives of CSR-conscious firms make significantly lower profits from their purchases than executives of non-CSR-conscious firms. We also find that as firms increase (decrease) CSR consciousness, their executives make lower (higher) trading profits. We contribute to the literature by suggesting that CSR image can act as an unintended governance mechanism that constrains, although does not eliminate, self-serving behavior such as insider trading.