Insiders' Sales Under Rule 10b5-1 Plans and Meeting or Beating Earnings Expectations

Posted: 27 Mar 2013

See all articles by Stan Veliotis

Stan Veliotis

Fordham University - Gabelli School of Business

John Shon

Fordham University

Date Written: September 4, 2012


We find that firms with insider sales executed under Rule 10b5-1 plans exhibit a higher likelihood of meeting or beating analysts' earnings expectations (MBE). This relation between MBE and plan sales is more pronounced for the plan sales of chief executive officers (CEOs) and chief financial officers (CFOs) and is nonexistent for other key insiders. The market reactions to firms that successfully meet or beat expectations are relatively positive compared with their peers that fail to do so. One interpretation of our results is that CEOs and CFOs who sell under these plans may be more likely to engage in strategic behavior to meet or beat expectations in an effort to maximize their proceeds from plan sales. However, readers should exercise caution in making inferences, because the potential presence of limit order transactions makes it difficult to unambiguously determine the direction of causality of the relation we document.

Keywords: insider trading, meet or beat expectations, Securities Exchange Act of 1934, Rule 10b5-1, planned trade

JEL Classification: K22, M41, M48, M52, M59

Suggested Citation

Veliotis, Stanley and Shon, John, Insiders' Sales Under Rule 10b5-1 Plans and Meeting or Beating Earnings Expectations (September 4, 2012). Management Science, 2013; Fordham University Schools of Business Research Paper. Available at SSRN:

Stanley Veliotis (Contact Author)

Fordham University - Gabelli School of Business ( email )

441 E Fordham rd
Bronx, NY 10458
United States

John Shon

Fordham University ( email )

113 West 60th Street
New York, NY 10019
United States

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