Flying below the radar: Insider trading by executives below the top

Abstract

To enforce insider trading laws, financial regulators require top executives in listed companies to make their own-company trades public. One implication of this regulatory focus is that executives below the top fly under the radar. We use register data from Norway to examine whether executives below the top in listed companies earn abnormal returns on purchases in own-company stock. We show evidence of positive abnormal returns of own-company purchases using several alternative benchmarks, including own-company sells, purchases and sells of other-company stocks, and purchases prior to joining the company. The estimates are economically large: about 100 basis points per month.

Keywords: insider trading, executives, employees, regulation

JEL Classification: G30, G32, G38