Asymmetric impact of compliance management reform on opportunistic insider trading: Evidence from Chinese state-owned enterprises

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Authors: Wencheng Cao, Yuan George Shan, Joey Wenling Yang
Cited by: 2
References: 59

Abstract

Using a sample of the listed state-owned enterprises (SOEs) in China, this study investigates the impact of the compliance management reform on opportunistic insider trading. The results show that the reform significantly constrains opportunistic insider selling by executives in SOEs, while having insignificant impact on insider purchases. Mechanism analyses suggest that the effect primarily operates through improvements in corporate governance quality and reductions in information asymmetry. Moreover, the inhibitory effect of compliance management is more pronounced among local SOEs, firms subject to weaker external oversight, those located in regions with underdeveloped institutional environments, and it primarily suppresses opportunistic insider selling by directors and senior management. Additional analysis indicates that compliance management significantly mitigates stock price crash risk and contributes to capital market stability. This study contributes to the literature on the determinants of opportunistic insider trading by highlighting the role of compliance management as an external governance mechanism. It also provides practical implications for policymakers aiming to integrate government regulation with internal compliance practices to promote the high-quality development of capital markets. • We examine whether compliance management mitigates opportunistic insider trading. • Compliance management leads to a reduction in opportunistic insider selling only. • This effect is achieved through two mechanisms: corporate governance and information asymmetry. • The impact is pronounced in local SOEs, weaker external oversight, and less developed institutional environments. • Compliance management reduces stock price crash risk and enhances capital market stability.

Fields of Study & Subjects

Auditing Earnings Management Governance Corporate Finance and Governance Financial Markets and Investment Strategies

Publication details

Journal / source
Emerging Markets Review
Publisher
Elsevier BV
Volume
72
Pages
101438–101438
Publication date
13 January 2026
Language
EN