The behavioral intentions of illegal insider trading: effects of gain-loss frames and socio-psychological factors

Purpose The pursuit of financial gains is not the sole reason for committing financial crimes. For example, avoiding financial losses could be an important factor that causes the insider trading behaviors. The purpose of this paper is to discuss people’s intention to engage in illegal insider trading behaviors. Design/methodology/approach The authors propose a research model and an experimental research design. Four versions of scenario-based questionnaires are developed in the research. The four versions of scenarios describe the illegal insider trading behaviors under different gain-loss frames. Findings This conceptual study proposes a theoretical model and an experimental design to explain how gain-loss frames and some socio-psychological factors (i.e. interest consideration, social consensus, perceived risk of being caught and moral rationalization) are hypothesized to affect people’s intention to engage in illegal insider trading behaviors. As a conceptual paper, this manuscript lays the groundwork for future empirical validation, outlining the theoretical propositions and a robust methodology for data collection and analysis. Originality/value Insider trading is a critical issue in the studies on corporate governance and financial crimes. Nonetheless, there has been no investigation into the effects of gain-loss frames on the people’s intentions to engage in illegal insider trading behaviors. For the purpose of this study, the authors focus on classic illegal insider trading, defined as the trading of securities by individuals who possess material, non-public information about the security, obtained through a breach of a fiduciary duty or similar relationship of trust and confidence, and who use that information for personal gain.