In Search of Opportunistic Trades of Corporate Insiders: Evidence from the US Market

44 Pages Posted: 16 Dec 2019

See all articles by Abu Zakir Md. Rasel Chowdhury

Abu Zakir Md. Rasel Chowdhury

Stockholm University

Sabur Mollah

Sheffield University Management School, University of Sheffield; Swansea Management School, Swansea University; Hull University Business School; Hull University Business School

Mir A. Zaman

University of Northern Iowa - Department of Finance

Omar Al Farooque

University of New England (Australia) - UNE Business School

Date Written: November 29, 2019

Abstract

This study investigates the opportunistic trading behaviour of core insiders’ group compared with that of non-core insiders’ group. Specifically, we investigate whether trades of these corporate insiders’ groups are driven by superior information or contrarian beliefs about firms’ future earnings, or both, in order to earn abnormal returns. We document that although both core and non-core insiders’ groups are equally motivated by contrarian beliefs, their motivational differences regarding opportunistic trades are primarily tied to preferential and favoured access to superior private information. In addition, we find evidence that information asymmetry and the Global Financial Crisis (GFC) have effects on their opportunistic trades. We also reveal that abnormal returns earned by core insiders’ group from their opportunistic trades are related to superior information about firms’ future earnings. Our findings have significant implications for opportunistic insider trading in the US market.

Keywords: Opportunistic Trades; Core Insiders; Non-Core Insiders; Contrarian Beliefs; Superior Information

JEL Classification: G14

Suggested Citation

Rasel Chowdhury, Abu Zakir Md. and Mollah, Sabur and Zaman, Mir and Farooque, Omar Al, In Search of Opportunistic Trades of Corporate Insiders: Evidence from the US Market (November 29, 2019). Available at SSRN: https://ssrn.com/abstract=3495478 or http://dx.doi.org/10.2139/ssrn.3495478

Abu Zakir Md. Rasel Chowdhury

Stockholm University ( email )

Kräftriket 3A
Stockholm Business School
Stockholm, --Select-- 106 91
Sweden

Sabur Mollah (Contact Author)

Sheffield University Management School, University of Sheffield ( email )

Conduit Road
Sheffield, Sheffield S10 1FL
United Kingdom

Swansea Management School, Swansea University ( email )

Singleton Park
Swansea, Wales SA2 8PP
United Kingdom

Hull University Business School ( email )

Cottingham Road
Hull, Great Britain HU6 7RX
United Kingdom

Hull University Business School ( email )

Cottingham Road
Hull, Hull HU6 7RX
United Kingdom

Mir Zaman

University of Northern Iowa - Department of Finance ( email )

Cedar Falls, IA 50614-0124
United States
319-273-2579 (Phone)
319-273-2922 (Fax)

Omar Al Farooque

University of New England (Australia) - UNE Business School ( email )

Armidale, NSW 2351
Australia

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