Arrests and indictments of corporate insiders, ownership structure, and corporate governance: Evidence from Korea

We find evidence that higher insider ownership is significantly associated with lower incidences of insider arrests and indictments in the Korean stock market for the period of 2000 through 2015. This evidence is robust to different measures of insider ownership: Cash flow rights, control rights, wedge, and managerial ownership. Our findings are consistent with the view that the larger ownership combined with longer tenure of corporate insiders, while potentially entrenching insiders, extend the time horizon of these insiders so that they have stronger incentives to minimize the incidences of severe and serious corporate crimes, as reflected in insider arrests and indictments, that can substantially harm long-term firm value.