Information Asymmetry and Politicians’ Investment Behaviors: Evidence from the Korean National Assembly

This study examines the effect of access to the privileged information on personal asset portfolio returns of Korean National Assembly members. Using unique and rich dataset, we show that high accessibility of the privileged information about national policies is positively related to personal asset portfolio returns. However, we also find that for each member, their first initiation of financial disclosure (the details of their personal asset portfolio) to the public negatively affects their share of risky assets in their personal portfolio. Lastly, our empirical results suggest that personal interests of the members may cause their voting decision when passing important bills that are closely related to the real estate markets or financial markets. Overall, our empirical results suggest that the privileges of the National Assembly members can improve their personal asset portfolio returns, although they are more risk-averse than before the initiation of public financial disclosure. This study contributes to the literature by examining the influence of privileged information on personal asset portfolio returns.