Informed Trading in Family Firms: Evidence from Short Selling around Insider Sales

38 Pages Posted: 30 May 2016 Last revised: 3 Nov 2020

See all articles by Hanwen Sun

Hanwen Sun

University of Bath, School of Management

Shuxing Yin

University of Sheffield - School of Management

Date Written: January 29, 2017

Abstract

Using a novel dataset of insider trading and short selling from the Hong Kong Stock Exchange, we investigate potential information leakage from insiders to short sellers, particularly in family-controlled firms. We document a significant increase in short selling volume before information on insider sales is released to the public. The abnormal short sales are much stronger in family-controlled firms than state-owned companies and widely held companies. Furthermore, the concave relationship between the intensity of short selling and family control contributes to the debate on whether family presence facilitates or limits informed trading. We also find that, for family-controlled firms, trading by insiders who do not belong to the family attracts more attention by short sellers and comes with stronger stock return predictability.

Keywords: insider trading, short selling, family firms, informed trading

JEL Classification: G14, G18, G32, G38

Suggested Citation

Sun, Hanwen and Yin, Shuxing, Informed Trading in Family Firms: Evidence from Short Selling around Insider Sales (January 29, 2017). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2786629

Hanwen Sun (Contact Author)

University of Bath, School of Management ( email )

School of Management, University of Bath
Bath
Bath, BA2 7AY
United Kingdom

Shuxing Yin

University of Sheffield - School of Management ( email )

9 Mappin Street
Sheffield, S1 4DT
United Kingdom

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