Attentive Insider Trading
49 Pages Posted: 2 Feb 2013 Last revised: 12 Sep 2014
Date Written: August 1, 2014
We provide evidence that some profitable insider stock selling is motivated by public information. At firms that disclose having concentrated sales relationships, insiders appear to sell their own stock profitably based on public information about their principal customers. Supplier insiders also sell more stock when public information about their customers’ recent returns and earnings surprises suggests they will earn larger profits. These results are stronger when outside investor attention could be lower. Outside of this setting, insiders engage in a higher proportion of routine sales and their sales are less profitable. We do not find similar patterns for insider purchases. These results call into question the extent to which insiders trade illegally on private information.
Keywords: insider trading, informed trading, inattention, supply chain
JEL Classification: G12, G14, G18
Suggested Citation: Suggested Citation