Strategic Trading and Trade Reporting by Corporate Insiders
BUW- Schumpeter School of Business and Economics
University of Bonn - The Bonn Graduate School of Economics
Stockholm School of Economics - Department of Finance; London School of Economics & Political Science (LSE) - Financial Markets Group
University of Mannheim - Finance Area
February 4, 2012
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, G32working papers series
Date posted: January 17, 2010 ; Last revised: November 13, 2012
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