Trading Ahead of Barbarians' Arrival at the Gate: Insider Trading on Non-Inside Information

79 Pages Posted: 30 Jan 2022 Last revised: 17 Nov 2022

See all articles by Georgy Chabakauri

Georgy Chabakauri

London School of Economics and Political Science

Vyacheslav Fos

Boston College - Department of Finance; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Wei Jiang

Emory University Goizueta Business School; ECGI; NBER

Date Written: October 1, 2022

Abstract

Privately informed about firm fundamentals, corporate insiders detect activism-motivated trades better than other traders. This paper presents empirical evidence and solves the model of this novel form of insider trading motivated by non-insider information. Corporate insiders preserve their ownership (restraining from selling, or even buying more) before activist interventions go public, to benefit from price appreciation and to defend their private benefits of control. Response to real-time (pre-disclosure) activist trading is stronger precisely when positive information about firm fundamentals is absent, supporting the mechanism that insiders attribute order flows to activist interest when speculation on fundamentals could be ruled out.

Keywords: insider trading, activist trading, shareholder activism

JEL Classification: G14,G34

Suggested Citation

Chabakauri, Georgy and Fos, Vyacheslav and Jiang, Wei, Trading Ahead of Barbarians' Arrival at the Gate: Insider Trading on Non-Inside Information (October 1, 2022). Columbia Business School Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=4018057 or http://dx.doi.org/10.2139/ssrn.4018057

Georgy Chabakauri

London School of Economics and Political Science ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

HOME PAGE: http://personal.lse.ac.uk/CHABAKAU/

Vyacheslav Fos (Contact Author)

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Wei Jiang

Emory University Goizueta Business School ( email )

1300 Clifton Rd
Atlanta, GA 30322
United States

ECGI ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
290
Abstract Views
1,180
rank
154,982
PlumX Metrics