Asymmetric Trading by Insiders – Comparing Abnormal Returns and Earnings Prediction in Spain and Australia

22 Pages Posted: 16 Mar 2013

See all articles by Igor Goncharov

Igor Goncharov

Lancaster University - Department of Accounting and Finance

Allan Hodgson

University of Queensland - Faculty of Business, Economics and Law; Financial Research Network (FIRN)

Sonia Sanabria

Universidad de Alicante-Dpto. Economía Financiera

Suntharee Lhaopadchan

Kasetsart University - Faculty of Management Sciences

Date Written: March 2013

Abstract

This paper examines whether the ‘external governance’ imposed by comparative financial accounting standards reduces the trading advantage of insiders. We do this by directly comparing insider trading returns and insider’s ability to predict future earnings from accruals in Spain and Australia. Results show higher excess returns and greater prediction of future earnings from conditioned insider trading in Australia that is then utilized by financial analysts to lower forecast errors – particularly in contrarian‐based accruals trading. Possible explanations include: (i) a high asymmetric quality for market‐based accruals, (ii) information transfer from informed insiders to uninformed insiders and financial analysts and (iii) a more timely dissemination of financial information in Spain through different ownership and governance structures.

Keywords: Insider trading, Earnings predictability, Market‐based accounting accruals, Analyst forecasts, Information asymmetry

JEL Classification: G10, G14, M41

Suggested Citation

Goncharov, Igor and Hodgson, Allan C. and Sanabria, Sonia and Lhaopadchan, Suntharee, Asymmetric Trading by Insiders – Comparing Abnormal Returns and Earnings Prediction in Spain and Australia (March 2013). Accounting & Finance, Vol. 53, Issue 1, pp. 163-184, 2013, Available at SSRN: https://ssrn.com/abstract=2234287 or http://dx.doi.org/10.1111/j.1467-629X.2011.00461.x

Igor Goncharov (Contact Author)

Lancaster University - Department of Accounting and Finance ( email )

The Management School
Lancaster LA1 4YX
United Kingdom

Allan C. Hodgson

University of Queensland - Faculty of Business, Economics and Law ( email )

4072 Brisbane, Queensland
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Sonia Sanabria

Universidad de Alicante-Dpto. Economía Financiera ( email )

Ctra. S. Vicente s/n
Alicante 03690
Spain

Suntharee Lhaopadchan

Kasetsart University - Faculty of Management Sciences ( email )

199 Sukhumvit Road
Thungsukhla
Siracha, Chonburi 20230
Thailand

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