SEC Rule 10b5-1 Plans and Strategic Trade around Earnings Announcements

42 Pages Posted: 8 Dec 2016

See all articles by Artur Hugon

Artur Hugon

Arizona State University (ASU)

Yen-Jung Lee

National Taiwan University

Date Written: December 5, 2016


We examine how corporate insiders profit from private information about future earnings performance through SEC Rule 10b5-1 trading plans. We first provide evidence consistent with insiders using 10b5-1 plans to sell stock in advance of disappointing earnings results. We then examine insiders who not only currently use 10b5-1 plans, but also actively traded their own company’s stock prior to the availability of such plans. We find that this group traded aggressively on earnings information prior to 10b5-1, but then shifted their aggressive trading into 10b5-1 plans after the availability of planned trading. We also document several questionable patterns associated with their trading behavior. Namely, their trades tend to be irregularly timed, close to the plan initiation date, infrequent in nature, and executed during traditional earnings blackout periods. In terms of firm characteristics, these insiders are more likely to be employed at firms with weaker firm governance and lower institutional ownership.

Keywords: Insider Trading, Rule 10b5-1, Earnings Announcements

JEL Classification: G32, M41, M52

Suggested Citation

Hugon, Artur and Lee, Yen-Jung, SEC Rule 10b5-1 Plans and Strategic Trade around Earnings Announcements (December 5, 2016). Available at SSRN: or

Artur Hugon

Arizona State University (ASU) ( email )

Farmer Building 440G PO Box 872011
Tempe, AZ 85287
United States

Yen-Jung Lee (Contact Author)

National Taiwan University ( email )

Department of Accounting
No.1, Roosevelt Road, Sec. 4
Taipei 10617
33661110 (Phone)

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