Opportunism as a Firm and Managerial Trait: Predicting Insider Trading Profits and Misconduct (Presentation Slides)

61 Pages Posted: 25 May 2018

See all articles by Usman Ali

Usman Ali

Pacific Investment Management Company (PIMCO)

David A. Hirshleifer

Marshall School of Business, USC; National Bureau of Economic Research (NBER)

Date Written: May 14, 2018

Abstract

These slides summarize a paper on opportunism by corporate insiders. We show that opportunistic insiders can be identified through the profitability of their trades prior to quarterly earnings announcements (QEAs), and that opportunistic trading is associated with various kinds of firm/managerial misconduct. A value-weighted trading strategy based on (not necessarily pre-QEA) trades of opportunistic insiders earns monthly 4-factor alphas of over 1% — much higher than in past insider trading literature and substantial/significant even on the short side. Firms with opportunistic insiders have higher levels of earnings management, restatements, SEC enforcement actions, shareholder litigation, and executive compensation. These findings suggest that opportunism is a domain-general trait.

See paper at https://ssrn.com/abstract=2635257

Keywords: insider trading, managerial opportunism, managerial traits, misconduct, financial reporting, compensation

JEL Classification: G14, G34, G38, M12, M14, M41

Suggested Citation

Ali, Usman and Hirshleifer, David A., Opportunism as a Firm and Managerial Trait: Predicting Insider Trading Profits and Misconduct (Presentation Slides) (May 14, 2018). Available at SSRN: https://ssrn.com/abstract=3178347 or http://dx.doi.org/10.2139/ssrn.3178347

Usman Ali

Pacific Investment Management Company (PIMCO) ( email )

United States

David A. Hirshleifer (Contact Author)

Marshall School of Business, USC ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

HOME PAGE: http://https://sites.uci.edu/dhirshle/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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