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What Do Insiders Know? Evidence from Insider Trading Around Share Repurchases and SEOs

Journal of Corporate Finance, 2021, 66: 101544

27th Annual Conference on Financial Economics and Accounting Paper

Swiss Finance Institute Research Paper No. 19-11

62 Pages Posted: 16 Feb 2016 Last revised: 19 Apr 2021

See all articles by Peter Cziraki

Peter Cziraki

University of Toronto - Department of Economics; Tilburg Law and Economics Center (TILEC)

Evgeny Lyandres

Tel Aviv University

Roni Michaely

The University of Hong Kong; ECGI

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

Cziraki, Peter and Lyandres, Evgeny and Michaely, Roni, What Do Insiders Know? Evidence from Insider Trading Around Share Repurchases and SEOs (October 9, 2019). Journal of Corporate Finance, 2021, 66: 101544, 27th Annual Conference on Financial Economics and Accounting Paper, Swiss Finance Institute Research Paper No. 19-11, Available at SSRN: https://ssrn.com/abstract=2732969 or http://dx.doi.org/10.2139/ssrn.2732969

Peter Cziraki (Contact Author)

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S3G7
Canada
+1 416 946 3298 (Phone)

HOME PAGE: http://www.economics.utoronto.ca/petercziraki

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Evgeny Lyandres

Tel Aviv University ( email )

Ramat Aviv
Tel-Aviv, 6997801
Israel
6400241 (Fax)

Roni Michaely

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

ECGI ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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