Disclosure of Financial Statement Line Items and Insider Trading Around Earnings Announcements

43 Pages Posted: 19 Apr 2019

See all articles by Yongoh Roh

Yongoh Roh

New York University (NYU), Leonard N. Stern School of Business

Paul Zarowin

New York University (NYU) - Department of Accounting

Date Written: January 3, 2019

Abstract

This paper examines the relation between voluntary disclosure of financial statement line items accompanying, and insider trading around, quarterly earnings announcements. We find that investors’ reaction to positive earnings news is temporarily heightened by financial statement line items disclosed during earnings announcements. We show that managers, apparently aware of investors’ reaction, disclose more financial statement line items along with earnings and profitably trade shortly after earnings announcements. These results are more pronounced for CEO/CFO trades and opportunistic insider trades. Overall, our results are consistent with managers’ strategically disclosing line items to exploit the short-term return effect to their private benefit. We integrate three previously disparate phenomena – stock returns around earnings announcements, insider trading around earnings announcements, and voluntary disclosures around earnings announcements – into pieces of one mosaic.

Keywords: financial statement line items, insider trading, earnings announcements

JEL Classification: G14, M41

Suggested Citation

Roh, Yongoh and Zarowin, Paul, Disclosure of Financial Statement Line Items and Insider Trading Around Earnings Announcements (January 3, 2019). NYU Stern School of Business, Available at SSRN: https://ssrn.com/abstract=3365212 or http://dx.doi.org/10.2139/ssrn.3365212

Yongoh Roh

New York University (NYU), Leonard N. Stern School of Business ( email )

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Suite 10-180
New York, NY 10012
United States

Paul Zarowin (Contact Author)

New York University (NYU) - Department of Accounting ( email )

40 West 4th Street, Suite 400
422 Tisch Hall
New York, NY 10012-1118
United States
212-998-0015 (Phone)
212-995-4004 (Fax)

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