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Strategic Trading and Trade Reporting by Corporate InsidersAndré BetzerBUW- Schumpeter School of Business and Economics Jasmin GiderUniversity of Bonn - The Bonn Graduate School of Economics Daniel MetzgerStockholm School of Economics - Department of Finance; London School of Economics & Political Science (LSE) - Financial Markets Group Erik TheissenUniversity of Mannheim - Finance Area February 4, 2012 Abstract: Regulations in the pre-Sarbanes–Oxley era allowed corporate insiders considerable flexibility in strategically timing their trades and SEC filings, e.g., by executing several trades and reporting them jointly after the last trade. We document that even these lax reporting requirements were frequently violated and that strategic timing of trades and reports was common. Event study abnormal returns are larger after reports of strategic trades than after reports of otherwise similar nonstrategic trades. Our results imply that delayed reporting impedes the adjustment of prices to the information revealed by insider trades. They lend strong support to the more stringent reporting requirements established by the Sarbanes–Oxley Act.
Number of Pages in PDF File: 51 Keywords: Insider trading, directors' dealings, corporate governance, market efficiency JEL Classification: G14, G3, G32 working papers seriesDate posted: January 17, 2010 ; Last revised: November 13, 2012Suggested CitationContact Information
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