Cross-Monitoring of Corporate Governance: From the Insider Trading Prospective of IPO Firms

• Main Authors: Aulia Herdiani, 何安玉
• Other Authors: Ruei-Shian Wu
• Format: Others
• Language: en_US
• Online Access: http://ndltd.ncl.edu.tw/handle/s7yd32

碩士 === 元智大學 === 財務金融暨會計碩士班(會計學程) === 103 === The purpose of this study is to examine and distinguish different role of different corporate governance mechanisms in mitigating insider trading. Internal and external governance have different problems and mechanisms in limiting the extent of exploiting of private information by insiders. We found that better-governed firms could mitigate insiders’ profitability more effective than poorer-governed firms. Besides, the more reputable underwriters hired during IPO events, the lower the abnormal returns gained by insiders. In some extent, we emphasize in revealing which mechanism is more influential than the other one. The results show that better external governance mechanism plays active roles in mitigating insider trading when internal mechanism is less pronounced. Hence, we highlight that the quality of internal governance and reputable underwriters hired are more likely as substitutes rather than complements. In addition, we extend our analysis to examine whether internal and external governance, through cross-monitoring, could be a vigorous mechanism in mitigating the activities of insiders in profiting themselves. Reversely, we found that when better-governed firms work together with reputable underwriters during IPO events, it will be less effective in discouraging insider trading, moreover, it could give chances managers to earn short-term benefits.