The impact of economic policy uncertainty on insider trades: A cross-country analysis

This study examines whether economic policy uncertainty affects insider trades. Using data from 22 countries, I find a positive association between economic policy uncertainty and the frequency and volume of insider trades. Moreover, there is a negative relationship between insider trades and future firm performance during periods of high economic policy uncertainty. The effect is larger in firms with a poor information environment, firms with less strict monitoring, and for firms that are more sensitive to economic policy uncertainty. The findings are robust to alternative sample periods, alternative dependent and independent variables, different model specifications, and after including additional country-level factors. Additional analysis suggests that investor sentiment and firm risks increase during periods of high uncertainty. Overall, I provide evidence that increased economic policy uncertainty enlarges the information advantage of insiders, and increases insider trading.