Insider Trading and the Post-Earnings Announcement Drift

Journal of Business Finance & Accounting, Forthcoming

42 Pages Posted: 5 Jun 2017 Last revised: 11 Dec 2017

See all articles by Christina Dargenidou

Christina Dargenidou

University of Exeter Business School - XFI Centre for Finance and Investment

Ian Tonks

University of Bristol

Fanis Tsoligkas

University of Bath - School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: December 10, 2017

Abstract

We show that trades by corporate insiders after an earnings announcement determine in part the extent of the post-earnings announcement drift anomaly. Contrarian trades mitigate the under-reaction to earnings announcements, and confirmatory trades allow for price discovery with price movements continuing in the same direction of the earnings surprise. These results are consistent with insider trading being a mechanism that provides relevant information on transitory or permanent changes to the earnings process allowing the market to make appropriate inferences about the nature of the earnings surprise.

Keywords: Insider trading, earnings announcements, market under-reaction, market efficiency

JEL Classification: G14, M41

Suggested Citation

Dargenidou, Christina and Tonks, Ian and Tsoligkas, Fanis, Insider Trading and the Post-Earnings Announcement Drift (December 10, 2017). Journal of Business Finance & Accounting, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2980289 or http://dx.doi.org/10.2139/ssrn.2980289

Christina Dargenidou

University of Exeter Business School - XFI Centre for Finance and Investment ( email )

University of Exeter
Xfi Building, Rennes Dr.
Exeter, EX4 3BZ
United Kingdom

Ian Tonks (Contact Author)

University of Bristol ( email )

Department of Finance and Accounting
15-19 Tyndalls Park Road
Bristol, BS8 1PQ
United Kingdom

Fanis Tsoligkas

University of Bath - School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

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