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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 Bin Ke Pennsylvania State University Charles Shi National University of Singapore (NUS) - Business School; University of California-Irvine - Paul Merage School of Business Journal of Accounting & Economics, Forthcoming Abstract: 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.
Keywords: accounting standards, government regulation, insider trading, litigation risk, stock-based compensation JEL Classifications: J33, K22, M12, M41 Accepted Paper SeriesDate posted: June 20, 2006 ; Last revised: June 20, 2006Suggested CitationContact Information
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