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Insider Stock Trading and the Bond Market

Posted: 21 Dec 2012 Last revised: 1 Mar 2016

Andreas Oehler

Bamberg University

Kuntara Pukthuanthong

University of Missouri, Columbia

Thomas John Walker

Concordia University, Quebec - Department of Finance

Stefan Wendt

School of Business, Reykjavik University

Multiple version iconThere are 2 versions of this paper

Date Written: November 16, 2015

Abstract

Hardly anything is known about how bond market participants react to insider stock trades. Our study attempts to fill this gap by analyzing the bond market reaction around insider transactions in U.S. firms during the period from 2002 to 2009. Our dataset covers 993 stock purchases and 6,562 stock sales by corporate insiders. We employ event study methodology to determine the cumulative abnormal bond price returns in a number of predetermined subperiods around the publication date and find that insider purchases negatively influence corporate bond prices, whereas insider sales appear to convey a positive signal to the bond market. The results for purchases are most obvious for financial firms and for investment grade firms; the results for sales are larger in the subsamples including non-financial firms and non-investment grade firms. For both purchases and sales the effect is largest when the transactions are executed by CEO-Chairmen or during the crisis period. The results of our regression analysis support the findings from the event study and reveal that purchases related to benefit plans transmit a less negative signal to the market than other purchases.

Keywords: Bond Pricing, Credit Risk, Insider Trading

JEL Classification: G12, G14, G30

Suggested Citation

Oehler, Andreas and Pukthuanthong, Kuntara and Walker, Thomas John and Wendt, Stefan, Insider Stock Trading and the Bond Market (November 16, 2015). Available at SSRN: https://ssrn.com/abstract=2192522

Andreas Oehler (Contact Author)

Bamberg University ( email )

Kaerntenstrasse 7
Bamberg 96045
Germany
+49 951-863-2536 (Phone)
+49 951-863-2538 (Fax)

HOME PAGE: http://www.uni-bamberg.de/bwl-finanz/

Kuntara Pukthuanthong

University of Missouri, Columbia ( email )

Robert J. Trulaske, Sr. College of Business
403 Cornell Hall
Columbia, MO 65211
United States
6198076124 (Phone)

Thomas John Walker

Concordia University, Quebec - Department of Finance ( email )

Montreal, Quebec H3G 1M8
Canada

Stefan Wendt

School of Business, Reykjavik University ( email )

Menntavegur 1
Reykjavik, 101
Iceland

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