Does public data openness curb insider trading? Evidence from China

This paper examines whether public data openness affects insider trading behavior and profitability. Utilizing China’s staggered municipal launch of open government data (OGD) platforms and a stacked difference-in-differences design, we find that public data openness reduces insider trading profitability. Mechanism tests reveal that OGD platforms operate through an information channel by enriching the firm-level information environment, specifically increasing analyst coverage, narrowing bid-ask spreads, and reducing stock price synchronicity. Further analyses show that OGD platforms compress insider trading on both the extensive margin (reducing overall trading likelihood) and the intensive margin (lowering the probability of trade success conditional on trading). Cross-sectional tests show that this deterrent effect is more pronounced for firms with weaker corporate governance and those located in regions with superior digital infrastructure. These findings offer insights for policymakers that public data infrastructure generates positive externalities for financial market integrity.