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Social media, investor-company interaction and insider trading profitability: Evidence from China

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  • Xie, Nan
  • Xu, Qifa
  • Jiang, Cuixia
  • Fu, Hong

Abstract

The emergence of social media enables minority shareholders to participate in corporate governance by making their voice heard. This study examines the effect of social media interaction between minority shareholders and companies on insider trading profitability. Using the “Easy interaction” platform in China, we find robust evidence that social media interaction significantly reduces the profitability of insider trades. This negative effect is stronger for firms with higher management shareholdings, poorer information environment, and less government involvement. Overall, our findings indicate that social media can play a role in corporate governance by restricting the profits of opportunistic insider trading activities.

Suggested Citation

  • Xie, Nan & Xu, Qifa & Jiang, Cuixia & Fu, Hong, 2023. "Social media, investor-company interaction and insider trading profitability: Evidence from China," Research in International Business and Finance, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:riibaf:v:66:y:2023:i:c:s0275531923001599
    DOI: 10.1016/j.ribaf.2023.102033
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    References listed on IDEAS

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    1. Qing He & Oliver M. Rui, 2016. "Ownership Structure and Insider Trading: Evidence from China," Journal of Business Ethics, Springer, vol. 134(4), pages 553-574, April.
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    Cited by:

    1. Li, Wenjie & Sun, Chaojing & Li, Yan & Ertz, Myriam, 2024. "Effects of business to business e-commerce platform-governance mechanisms on seller firms’ performance," Research in International Business and Finance, Elsevier, vol. 67(PB).
    2. Fung, Michael K. & Cheng, Louis T.W. & Shen, Jianfu, 2024. "Do media message receivers asymmetrically react to non-strategic and strategic media coverage? Evidence from Hong Kong," Research in International Business and Finance, Elsevier, vol. 70(PA).
    3. Wang, Haijun & Jiao, Shuaipeng & Sun, Guanglin, 2024. "Investor interaction and the valuation of listed companies," Research in International Business and Finance, Elsevier, vol. 67(PB).
    4. Sun, Chenhe & Ji, Yinuo & Chen, Zhenyun, 2023. "Insider selling and credit spread of corporate bonds1," Finance Research Letters, Elsevier, vol. 58(PB).
    5. Zhao, Yujie & Yao, Zhanghao & Li, Yuanqin & Zhou, Ping, 2023. "Can high-quality interactions lower the cost of debt? Insights from interactive investor platforms," Finance Research Letters, Elsevier, vol. 58(PC).

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