Stealth Trading and Trade Reporting by Corporate Insiders

Forthcoming, Review of Finance

60 Pages Posted: 17 Jan 2010 Last revised: 3 Feb 2014

See all articles by André Betzer

André Betzer

University of Wuppertal - Schumpeter School of Business and Economics

Jasmin Gider

Tilburg University - Tilburg University School of Economics and Management

Daniel Metzger

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM); European Corporate Governance Institute (ECGI); London School of Economics & Political Science (LSE) - Financial Markets Group

Erik Theissen

University of Mannheim - Finance Area

Date Written: February 2014

Abstract

Regulations in the pre-Sarbanes-Oxley era allowed corporate insiders considerable flexibility in timing their trades and engaging in stealth trading, 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 stealth trading was common. Event study abnormal returns are larger after reports of stealth trades than after reports of otherwise similar non-stealth 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.

Keywords: Insider trading, directors' dealings, corporate governance, market efficiency

JEL Classification: G14, G3, G32

Suggested Citation

Betzer, André and Gider, Jasmin and Metzger, Daniel and Theissen, Erik, Stealth Trading and Trade Reporting by Corporate Insiders (February 2014). Forthcoming, Review of Finance, Available at SSRN: https://ssrn.com/abstract=1537072 or http://dx.doi.org/10.2139/ssrn.1537072

André Betzer

University of Wuppertal - Schumpeter School of Business and Economics ( email )

Gaußstraße 20
Wuppertal
Germany

HOME PAGE: http://finance.uni-wuppertal.de/index.php?id=1153

Jasmin Gider

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Daniel Metzger

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

London School of Economics & Political Science (LSE) - Financial Markets Group ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Erik Theissen (Contact Author)

University of Mannheim - Finance Area ( email )

Mannheim, 68131
Germany

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