Inside Brokers

We identify the broker each corporate insider trades through, and show that analysts and mutual fund managers affiliated with such "inside brokers'" retain a substantial information advantage on the insider's firm, even after these trades are disclosed. Affiliated analysts issue more accurate earnings forecasts, and affiliated mutual funds trade the insider's stock much more profitably than their peers, following insider trades through their brokerage. Our results challenge the prevalent perception that information asymmetry arising from insider trading is acute only before trade disclosure, and suggest that brokers facilitating these trades are in a position to exploit this asymmetry.

Keywords: Insiders, Brokers, Analysts, Mutual Funds, Information Transmission

JEL Classification: G24, G30, G34, G38

Suggested Citation: Suggested Citation

Li, Frank Weikai and Mukherjee, Abhiroop and Sen, Rik, Inside Brokers (September 7, 2020). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2823353 or http://dx.doi.org/10.2139/ssrn.2823353