Do Insiders Trade on Government Subsidies?

Hanwen Sun, Kangtao Ye, Colin Zeng

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We examine whether and how insiders trade on government subsidies, a major instrument through which the governments intervene in the economy. Using a novel dataset of government subsidies of Chinese listed firms, we find that net insider purchase increases significantly during the month of subsidy receipt. The effect of subsidies on insider trading is weaker in firms with a more transparent information environment and when subsidies are granted in a more predictable manner. In contrast, the effect is more pronounced for politically connected firms. Further analysis shows that the subsidy-trading relation may reflect both insiders’ informational advantage concerning subsidies and their superior ability to detect mispricing-related opportunities. Our findings provide new insights into the capital market consequences of government subsidies through the lens of insider trading.
Original languageEnglish
Article number106946
JournalJournal of Accounting and Public Policy
Issue number2
Early online date4 Feb 2022
Publication statusPublished - 1 Mar 2022


  • Government subsidy
  • Information transparency
  • Insider trading
  • Political connection

ASJC Scopus subject areas

  • Accounting
  • Sociology and Political Science


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