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2018 | OriginalPaper | Chapter

10. Insider Trading and Corporate Governance in the Banking Sector. New Lessons on the Entrenchment Effect

Authors : Esther B. del Brio, Javier Perote, Alberto de Miguel, Gerardo Gómez

Published in: Corporate Governance in Banking and Investor Protection

Publisher: Springer International Publishing

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Abstract

This paper uses panel data estimation under the assumptions of the agency theory of insider trading to identify the factors enhancing bank insider trading. We conclude that the more entrenched the directors, the less prestigious the bank, the bigger the firm and the lower the charter values for high levels of ownership, the higher the intensity of insider trading activity. Thus, the emerging picture is of a scenario where insider trading activity is triggered by the absence of efficient control mechanisms, either external (regulators control the level of bank capitalization but it is not easy for them to also control other opportunistic behaviors) or internal (shareholders fail to control managers when managers’ stakes are very low or very high).

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Appendix
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Metadata
Title
Insider Trading and Corporate Governance in the Banking Sector. New Lessons on the Entrenchment Effect
Authors
Esther B. del Brio
Javier Perote
Alberto de Miguel
Gerardo Gómez
Copyright Year
2018
DOI
https://doi.org/10.1007/978-3-319-70007-6_10

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