|
|
|
|
||||
|
||||
Hiding in Plain Sight: Can Disclosure Enhance Insiders’ Trade Returns?M. Todd HendersonUniversity of Chicago - Law School Alan D. JagolinzerUniversity of Colorado - Leeds School of Business Karl A. MullerPennsylvania State University - Department of Accounting August 2012 U of Chicago Law & Economics, Olin Working Paper No. 411 CLEA 2008 Meetings Paper Rock Center for Corporate Governance at Stanford University Working Paper No. 7 Abstract: Can voluntary disclosure be used to enhance insiders’ strategic trade while providing legal cover? We investigate this question in the context of 10b5-1 trading plans. Prior literature suggests that insiders lose strategic trade value if their planned trades are disclosed. But disclosure might enhance strategic trade because courts can only consider publicly available evidence from defendants at the motion to dismiss phase of trial. This practice can enhance legal protection for firms that disclose planned trades, especially those disclosing detailed information. Consistent with increased legal protection, we find that voluntary disclosure of planned trades increases with firm litigation risk and potential gains to insiders’ trades. We also find that insider sales and abnormal returns are higher for disclosed plans, especially those that articulate specific plan details. This suggests that voluntary disclosure, which is conventionally thought to reduce information asymmetries, can create legal cover for opportunistic insider trading.
Number of Pages in PDF File: 33 Keywords: Rule 10b5-1, voluntary disclosure, insider trading JEL Classification: D82, G38, K22, M41, M45, M52 working papers seriesDate posted: May 27, 2008 ; Last revised: August 5, 2012Suggested CitationContact Information
|
|
||||||||||||||||||
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was processed by apollo6 in 0.516 seconds
