Download This PaperWhat Do Insiders Know? Evidence from Insider Trading Around Share Repurchases and SEOs
Journal of Corporate Finance, Forthcoming
27th Annual Conference on Financial Economics and Accounting Paper
62 Pages Posted: 16 Feb 2016 Last revised: 8 Nov 2019
Date Written: October 9, 2019
Abstract
We examine the nature of information contained in insider trades prior to corporate events. Insiders’ net buying increases before open market share repurchase announcements and decreases before seasoned equity offers. Higher insider net buying is associated with better post-event operating performance, a reduction in undervaluation, and, for repurchases, lower post-event cost of capital. Insider trading also predicts announcement returns and long-term stock price drift following events. Overall, our results suggest that insider trades before corporate events contain information about changes both in fundamentals and in investor sentiment.
Keywords: Insider Trading, Repurchases, Seasoned Equity Offers, Market Efficiency
JEL Classification: G14, G30, G32, G35
Suggested Citation: Suggested Citation
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