Do Brokers of Insiders Tip Other Clients?

Management Science, 2017

45 Pages Posted: 8 Mar 2018

See all articles by William J. McNally

William J. McNally

Wilfrid Laurier University - School of Business & Economics

Andriy Shkilko

Wilfrid Laurier University - Lazaridis School of Business and Economics

Brian F. Smith

Wilfrid Laurier University

Date Written: June 1, 2015

Abstract

We examine trading activity around insider transactions on the Toronto Stock Exchange and find evidence that some traders mimic insider positions. Our unique dataset allows us to establish a direct connection between insiders, their brokerages, and the brokerages’ other clients. The findings are consistent with the possibility that some brokerages tip their clients about insider trades. Insiders in our sample have good timing; returns are usually positive (negative) after insider purchases (sales). Insiders’ good timing translates to the mimicking transactions, which appear to be profitable net of trading costs. Evidence consistent with tipping is observed mainly for smaller independent brokerages.

Keywords: Insider trading, Tipping, Brokerages

JEL Classification: G14

Suggested Citation

McNally, William J. and Shkilko, Andriy and Smith, Brian Frederick, Do Brokers of Insiders Tip Other Clients? (June 1, 2015). Management Science, 2017, Available at SSRN: https://ssrn.com/abstract=3127731

William J. McNally

Wilfrid Laurier University - School of Business & Economics ( email )

75 University Avenue
Waterloo, Ontario N2L 3C5
CANADA
519-884-0710 ext. 2793 (Phone)
519-884-0201 (Fax)

Andriy Shkilko (Contact Author)

Wilfrid Laurier University - Lazaridis School of Business and Economics ( email )

LH 4050
75 University Ave. W.
Waterloo, Ontario N2L3C5
Canada
519.884.0710 ext. 2462 (Phone)
519.884.0201 (Fax)

Brian Frederick Smith

Wilfrid Laurier University ( email )

75 University Ave W
Waterloo, Ontario N2L 3C5
Canada

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