Indirect Insider Trading

64 Pages Posted: 19 Nov 2018 Last revised: 29 Apr 2020

See all articles by Bradley A. Goldie

Bradley A. Goldie

Miami University

Chao Jiang

University of South Carolina - Department of Finance

Paul D. Koch

Iowa State University - Finance Department; Iowa State University - Finance Department

M. Babajide Wintoki

University of Kansas - School of Business

Date Written: April 25, 2020

Abstract

Insiders must disclose indirect trades made through accounts they control, including family, trust, retirement, and foundation accounts. Trades made in these indirect accounts are more profitable than direct trades in the insider’s own account. In addition, indirect trades better predict earnings surprises and large price changes, and are associated with insiders at firms that have high information asymmetry. Indirect trades are also associated with opportunistic insiders who make non-routine trades, or who trade profitably before earnings announcements, or have a short investment horizon. Insiders are also less likely to trade through indirect accounts following periods of intense regulatory scrutiny.

Keywords: Insider trading, informed trading, information asymmetry, opportunism, trusts, retirement accounts, foundations, family networks

JEL Classification: G12, G14, G18

Suggested Citation

Goldie, Bradley A. and Jiang, Chao and Koch, Paul D. and Wintoki, Modupe Babajide, Indirect Insider Trading (April 25, 2020). Available at SSRN: https://ssrn.com/abstract=3270095 or http://dx.doi.org/10.2139/ssrn.3270095

Bradley A. Goldie

Miami University ( email )

2029 Farmer School of Business
800 E. High Street
Oxford, OH 45056
United States
(513) 529-3657 (Phone)
(513) 529-6992 (Fax)

Chao Jiang (Contact Author)

University of South Carolina - Department of Finance ( email )

1014 Greene Street
Columbia, SC 29208
United States

Paul D. Koch

Iowa State University - Finance Department

Ivy College of Business
Ames, IA 50011
United States
5152942491 (Phone)

HOME PAGE: http://https://www.business.iastate.edu/directory/pkoch/

Iowa State University - Finance Department

Ames, IA 50011-2063
United States
5152942491 (Phone)

Modupe Babajide Wintoki

University of Kansas - School of Business ( email )

1300 Sunnyside Avenue
Lawrence, KS 66045
United States

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