Jeopardy, Non-Public Information, and Insider Trading Around SEC 10-K and 10-Q Filings
Steven J. Huddart
Pennsylvania State University, University Park - Department of Accounting
Nanyang Technological University
NUS Business School, National University of Singapore
Journal of Accounting & Economics, Forthcoming
Evidence contrasting U.S. insider trades in high- and low-jeopardy periods and across firms at high and low risk for 10b-5 litigation indicates that insiders condition their trades on foreknowledge of price-relevant public disclosures, but avoid profitable trades when the jeopardy associated with such trades is high, such as immediately before earnings announcements. Insiders avoid profitable trades before quarterly earnings are announced and sell (buy) after good (bad) news earnings announcements. Insiders trade most heavily after earnings announcements and profit from foreknowledge of price-relevant information in the forthcoming Form 10-K or 10-Q filing.
Number of Pages in PDF File: 51
Keywords: accounting standards, government regulation, insider trading, litigation risk, stock-based compensation
JEL Classification: J33, K22, M12, M41Accepted Paper Series
Date posted: June 20, 2006
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