Inside the Director Network: When Directors Trade Inside, Interlock, and Unconnected Stocks
76 Pages Posted: 14 Apr 2014 Last revised: 23 Nov 2017
Date Written: November 22, 2017
Corporate directors earn abnormal returns when they buy their own company’s stock as insiders. Directors also outperform when they buy stocks with an interlock connection, where a co-board member is an insider. Directors do not consistently earn abnormal returns when they sell these connected stocks, or when they buy or sell stocks with no inside or interlock connection. Our findings are similar for trades that are made by directors before corporate events, and for director trades made on behalf of family members.
Keywords: Informed trading, insider trading, information asymmetry, market efficiency, interlocking board, corporate director network, family network, social network analysis
JEL Classification: G14, G19
Suggested Citation: Suggested Citation