This paper explores the impact of political network on insider trading activities in China. We find that stronger political network discourages insider trading. Such effect is more pronounced among long-standing and high-level connections, and persists in the events of M&A and public policy announcement when insiders may make profitable informed trading. This finding points to new cost of being politically connected. In exploring the underlying mechanisms, we confirm that the muted insider trading is related to preferable financial and policy support, and are more pronounced for SOEs in provinces with stronger market force and legal enforcement.
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