National identity and foreign directors' access to private information
研究首次实证发现，外国董事的内幕交易获利显著低于本国董事，表明国家身份影响私有信息获取，且该劣势在特定公司特征和情境下更为明显。
This study provides the first empirical evidence that directors' nationality significantly influences the profitability of insider trading. Using a large sample of reported stock transactions by directors of U.S.-listed firms between 1996 and 2023, I find that foreign directors earn statistically and economically lower abnormal returns following their trades compared to their domestic counterparts. The informational disadvantage of foreign directors appears only in firms with either a domestic CEO or CFO, lower board-level national diversity, when the directors work in overseas branches, and during the early stages of their tenure at the firm. These findings suggest that foreign directors face disadvantages in accessing private information due to the impact of national identity on information flow. I also find that this informational disadvantage only appears when foreign directors do not serve as top executives or independent directors and in firms with higher levels of information asymmetry. Further analysis suggests that the alternative explanation that foreign directors are less willing to trade on private information due to concerns about legal risks does not explain the findings. Additionally, I find that foreign directors' trades are less likely to be classified as opportunistic or to follow a clustered trading pattern, consistent with the finding that they exploit private information to a lesser extent. Moreover, I also find that trades by foreign directors trigger weaker market reactions compared to those executed by domestic directors. Finally, geographical distance and linguistic barriers are also found to influence foreign directors' ability to access and process information.