Do insiders profit from public environmental information? Evidence from insider trading

Abstract

We examine whether environmental costs impact the profitability of insider trading. We use a sample of 3189 purchase transactions and 10,200 sales transactions from 31 countries over 2011–2018. We uncover evidence that insiders sell their stocks profitably based on public environmental cost information. Further analysis indicates that these results become more pronounced in contexts of high investor inattention to environmental information, as measured by lower Google search frequencies for environmental information and the presence of right-leaning governments. Our findings demonstrate that insiders can benefit from publicly available environmental information and suggest that investor inattention to this information is a key driver of insider trading performance.