Title: Future firm performance, corporate governance, information asymmetry and insider trading – a systematic literature review using PRISMA

Authors: Yasmin Jamadar; Tze San Ong; Fakarudin Kamarudin; Asna Atqa Abdullah

Addresses: School of Business and Economics, Universiti Putra Malaysia, Serdang, 43400 Seri Kembangan, Selangor, Malaysia ' School of Business and Economics, Universiti Putra Malaysia, Serdang, 43400 Seri Kembangan, Selangor, Malaysia ' School of Business and Economics, Universiti Putra Malaysia, Serdang, 43400 Seri Kembangan, Selangor, Malaysia ' School of Business and Economics, Universiti Putra Malaysia, Serdang, 43400 Seri Kembangan, Selangor, Malaysia

Abstract: The purpose of this literature revision is to systematically review and analyse the current research on the effects of future firm performance and corporate governance on insider trading with the interaction of information asymmetry following the preferred reporting item guidelines (PRISMA). This study synthesises 25 journal articles published between 2005 and 2020. The abnormal returns earned from insiders' trades are primarily tied to preferential and favourable superior private information about firms' future performance. In addition, insiders generate significant abnormal returns in the companies with weak corporate governance rules. This review also reveals that the interaction of information asymmetry influences the relationship between future firm performance and insider trading and the relationship between corporate governance and insider trading. Hence, this study emphasises related asymmetric information conditions that lead to greater involvement in insider trading to earn abnormal profit. However, corporate governance contributes to the deterrence of insider trading. This study provides valuable information to assist market participants in the stock market.

Keywords: insider trading; information asymmetry; future earnings; corporate governance.

DOI: 10.1504/IJSE.2022.123878

International Journal of Sustainable Economy, 2022 Vol.14 No.3, pp.309 - 329

Received: 30 Jun 2021
Accepted: 26 Aug 2021
Published online: 04 Jul 2022 *

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