Does Corporate Social Responsibility Restrain Insider Trading?

Corporate social responsibility(CSR)began to cause the discussion and attention in the world since 2000.Corporations should take social responsibility has been becoming the common understanding in the whole society.In the same time,insider trading has always been a popular topic for decades.When we talk about preventing insider trading,it always refers to information disclosure to decline information asymmetry between inside traders and outside investors.Meanwhile,existing research shows that CSR-conscious corporations prefer to disclosure their CSR information,which has something in common with financial information disclosure.But they are not exactly the same,CSR information disclosure is spontaneous,optional and unfixed but financial information disclosure is not.Consequently,we conjecture that CSR restrain insider trading by declining information asymmetry,which cuts down the objective conditions of insider trading.Meanwhile,CSR-conscious corporations cultivate great corporate culture.So we make the second proposal that CSR restrain insider trading by leading executives towards noble,integrity and respectable,which changes the subjective motivation of insider trading.On the basis of existing research results,this paper will study the impact of CSR on insider trading based on information model and personal reputation model.This paper select data from the a-share(mainland China)listed companies in 2008-2014 with CSR and financial situation,and examines the relationship between CSR and insider trading.At the same time,this paper further considers the enterprise information transparency and executives' personal reputation that may have different impact on the research results.The empirical results show that CSR can restrict both of profitability and the volume of insider trading.And in the case of opaque enterprise information and poor executives' reputation,CSR has a stronger constrain on insider trading.Compared to executives' personal reputation,information transparency has a stronger impact on the relationship between CSR and insider trading.The main contribution of this paper is that the previous researches on insider trading are focused on the market reaction brought by transaction events and the relationship between enterprise financial characteristics and insider trading.This paper not only pays attention to insider trading based on information model,but also brings executives'personal reputation,the individual level factor,into the insider trading research content,which enriches the research system of it,and combines CSR(one of the enterprise culture characteristics)with insider trading.Besides that,this essay puts forward several suggestions to listed companies,regulators and CSR ratings agencies.And the results promote the practice of CSR in the whole society.