Strategic Disclosure Timing and Insider Trading

54 Pages Posted: 21 May 2014 Last revised: 16 Mar 2015

See all articles by Marina Niessner

Marina Niessner

Indiana University - Kelley School of Business - Department of Finance

Date Written: February 26, 2015

Abstract

I provide evidence that managers strategically manipulate their company’s information environment to extract private benefits. Exploiting an SEC requirement that managers disclose certain material corporate events within five business days, I show that managers systematically disclose negative events when investors are more distracted, causing returns to under-react for approximately three weeks. Strategic disclosure tim- ing is concentrated among smaller firms with high retail-investor ownership and low analyst coverage. Furthermore, I use the fact that most insider sales are scheduled in advance to demonstrate that top managers are more than twice as likely to strategically time disclosures if the return under-reaction benefits their insider sales. Finally, I find that firms that systematically disclose negative news on Fridays have higher levels of earnings management.

JEL Classification: G3

Suggested Citation

Niessner, Marina, Strategic Disclosure Timing and Insider Trading (February 26, 2015). Available at SSRN: https://ssrn.com/abstract=2439040 or http://dx.doi.org/10.2139/ssrn.2439040

Marina Niessner (Contact Author)

Indiana University - Kelley School of Business - Department of Finance

1309 E. 10th St
Bloomington, IN 47405
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
1,639
Abstract Views
6,957
Rank
20,071
PlumX Metrics