Are Banks Opaque? Evidence from Insider Trading

46 Pages Posted: 7 Feb 2018

See all articles by Fabrizio Spargoli

Fabrizio Spargoli

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)

Christian Upper

Bank for International Settlements (BIS)

Date Written: February 2018

Abstract

We use trades by US corporate insiders to investigate bank opacity, both in absolute terms and relative to other firms. On average, bank insider sales do not earn an abnormal return and do not predict stock returns. By contrast, bank insider purchases do, even though less than other firms. Our within-banking sector and over-time analyses also fail to provide evidence of greater opacity of banks vis-à-vis other firms. These results challenge conventional wisdom and suggest that, to assess bank opacity, the type of benchmark (transparency vs. other firms) and transaction/information (purchase/positive vs. sale/negative) are crucial.

Keywords: bank opacity, insider trading, financial stability

JEL Classification: G14, G20, G21

Suggested Citation

Spargoli, Fabrizio and Upper, Christian, Are Banks Opaque? Evidence from Insider Trading (February 2018). BIS Working Paper No. 697, Available at SSRN: https://ssrn.com/abstract=3116184

Fabrizio Spargoli (Contact Author)

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

Christian Upper

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

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