News media and insider trading profitability: An emerging country perspective

Abstract We test news media's disciplining by dissemination role and predictive power in insider trading related issues with a large and novel dataset on Chinese firms between 2008 and 2017. We find that more media coverage is associated with significantly lower level of insider trading profitability, which confirms the disciplining by dissemination role of media documented in the developed market. However, as a new evidence to the media and insider trading literature, we also find that media's negative tone has a positive correlation with future insider trading profitability, which is consistent with the media predictive power argument. In addition, we find that media's predictive power is amplified by a firm's good governance structure and low level of information asymmetry. Our study shows news media's effectiveness in predicting opportunistic insider trading in China.