Insider Trading Restrictions and Analysts' Incentives to Follow Firms

Journal of Finance, Volume 60, February 2005

46 Pages Posted: 18 Feb 2003 Last revised: 7 Sep 2017

See all articles by Robert M. Bushman

Robert M. Bushman

University of North Carolina Kenan-Flagler Business School

Joseph D. Piotroski

Stanford Graduate School of Business

Abbie J. Smith

University of Chicago - Booth School of Business

Date Written: December 1, 2003

Abstract

Motivated by extant finance theory predicting that insider trading crowds out private information acquisition by outside investors, we use analyst following data for 100 countries for the years 1987-1998, to study whether analyst following increases following adoption of or the initial enforcement of insider trading legislation. We document that both the intensity of analyst coverage (average number of analysts covering followed firms within a country) and breadth of coverage (the proportion of domestic listed firms followed by analysts) increase after initial enforcement of insider trading laws. We find that this increase is most prominent in emerging market and non-liberalized countries.

Keywords: insider trading, analyst following, enforcement of laws

JEL Classification: D82, F30, G28, G29, K42, M41

Suggested Citation

Bushman, Robert M. and Piotroski, Joseph D. and Smith, Abbie J., Insider Trading Restrictions and Analysts' Incentives to Follow Firms (December 1, 2003). Journal of Finance, Volume 60, February 2005. Available at SSRN: https://ssrn.com/abstract=373520 or http://dx.doi.org/10.2139/ssrn.373520

Robert M. Bushman

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-9809 (Phone)

HOME PAGE: http://public.kenan-flagler.unc.edu/faculty/bushmanr/

Joseph D. Piotroski (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Abbie J. Smith

University of Chicago - Booth School of Business ( email )

1101 East 58th Street
Graduate School of Business
Chicago, IL 60637-1561
United States
773-702-7295 (Phone)
773-702-0458 (Fax)

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