Local gambling preferences and insider trading profits: Evidence from China

Insider trading is common in China, raising concerns among investors and regulators. This study examines whether local gambling preferences are associated with insider trading profits. Results indicate that insiders at firms headquartered in gambling-prone regions earn higher trading profits. However, this effect diminishes in firms with more independent boards, a greater number of board committees, multiple block shareholders, and enhanced supervision from the China Securities Regulatory Commission. These findings underscore the need to consider social norms when designing policies to curb insider opportunism, especially in cultures where beliefs in luck and fate are prevalent.