Private Information in Executive Stock Option Trades: Evidence of Insider Trading in the UK

24 Pages Posted: 27 Sep 2010

See all articles by Kyriacos Kyriacou

Kyriacos Kyriacou

Brunel University London - Economics and Finance

Kul B. Luintel

Brunel University London - Economics and Finance

Bryan Mase

Brunel University

Abstract

UK executives' stock option exercises and associated sell decisions are motivated by private, inside, information. Executives use their inside information to lock in short-term gains, and to sell stock acquired prior to negative abnormal stock returns. This informed trading is robust to the alternative factors that might motivate the exercise of executive stock options, including option moneyness and value of exercise. We suggest that the disparity in informed trading between US and UK executives' option trades is related to important differences in the proportion of executive remuneration linked to options, the regulation of options, and the taxation of option gains.

Suggested Citation

Kyriacou, Kyriacos and Luintel, Kul B. and Mase, Bryan, Private Information in Executive Stock Option Trades: Evidence of Insider Trading in the UK. Economica, Vol. 77, Issue 308, pp. 751-774, October 2010, Available at SSRN: https://ssrn.com/abstract=1681686 or http://dx.doi.org/10.1111/j.1468-0335.2009.00775.x

Kyriacos Kyriacou (Contact Author)

Brunel University London - Economics and Finance ( email )

Uxbridge UB8 3PH
United Kingdom

Kul B. Luintel

Brunel University London - Economics and Finance ( email )

Uxbridge UB8 3PH
United Kingdom

Bryan Mase

Brunel University ( email )

Kingston Lane
Uxbridge, Middlesex UB8 3PH
United Kingdom

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