47 Pages Posted: 1 Aug 2013 Last revised: 28 Jul 2016
Date Written: July 19, 2016
Prior evidence on pre-bankruptcy-filing informed trade is mixed. The inconclusive findings might result from the sole focus on stock trading. We reassess the presence of pre-filing informed and insider trades by examining the information content of options trading before bankruptcy announcements. We find that bankruptcy filing returns are not significantly related to pre-filing insider stock trading. However, filing returns are significantly negatively related to pre-filing insider and informed options trading. The informational content of options trading reduces with options illiquidity and the amount of information impounded into pre-filing stock prices.
Keywords: Bankruptcy, O/S, Informed Options Trading, Insider Trading
JEL Classification: G12, G14, G33
Suggested Citation: Suggested Citation
Ge, Li and Hu, Jianfeng and Humphery-Jenner, Mark and Lin, Tse-Chun, Informed Options Trading Prior to Bankruptcy Filings (July 19, 2016). 28th Australasian Finance and Banking Conference; Asian Finance Association (AsianFA) 2016 Conference. Available at SSRN: https://ssrn.com/abstract=2302888 or http://dx.doi.org/10.2139/ssrn.2302888