Finance Seminar（2016-23）

Topic: The Independence of Independent Directors over Their Tenure: Insights from Insider Trading

Speaker: Sheng Huang, Singapore Management University

Time: Monday, 26 November, 10:30-12:00

Place: Room 216, Guanghua Building 2

Abstract:

We examine the effectiveness of board monitoring of insider trading over independent directors’ tenure. We show that the profitability of private trades by executives increases in independent directors’ tenure. This association is confined to independent directors who are expected to be more effective monitors when they join the board. Executives are more likely to trade opportunistically and during informationally more sensitive time when independent directors serve longer on the board, and these trades are more profitable. Certain governance factors such as the adoption of internal trading policies and blockholders sitting on the board are effective in mitigating the impact of long-tenured independent directors on executive trading profitability. Overall, the evidence suggests that the independence of long-tenured independent directors and their monitoring incentives can be compromised, and executives are more likely to exploit their informational advantages under weaker board monitoring. Consistent with this argument, we show that over their tenure unconnected independent directors are more likely to get socially connected with executives and their own private trades become more consistent with executives’ trades.

Introduction:

Dr. Sheng Huang is an Assistant Professor of Finance in Lee Kong Chian School of Business, Singapore Management University from 2009. His research interests are Corporate Finance, Corporate Governance, Financial Intermediation, Investment.He holds a B.A. in History and Economicsfrom Peking, an M. Phil in Economics from University of Cambridge, and a Ph.D. in Economics from Washington University in St. Louis in 2009.

//www.mysmu.edu.sg/faculty/shenghuang/

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