Insider Trading and Earnings Reporting: Evidence of Managerial Optimism or Opportunism?

28 Pages Posted: 13 Sep 2003

See all articles by Carol Marie Boyer

Carol Marie Boyer

Long Island University CW Post

Stephen John Ciccone

University of New Hampshire - Department of Accounting & Finance

Wei Zhang

SUNY at Albany

Date Written: July 2003

Abstract

This study examines managerial ethics with regard to earnings reporting and insider trading. Managers of firms with optimistic forecasts or firms with higher Street earnings versus GAAP earnings are considered candidates to be misleading investors. Two hypotheses are examined: 1) that these managers are indeed misleading investors and taking advantage of their deception by selling shares of their firms' stock at inflated prices (the managerial opportunism hypothesis) and 2) that these managers are not misleading investors, but merely believe the optimism surrounding their firms (the managerial optimism hypothesis). The tests find that managers who are candidates for misleading investors to opportunistically sell shares are actually behaving ethically. They buy relatively more shares than other managers, providing support for the managerial optimism hypothesis.

Keywords: analysts, forecasts, ethics, managerial opportunism

JEL Classification: D82, G14, G29, M41

Suggested Citation

Boyer, Carol Marie and Ciccone, Stephen J. and Zhang, Wei, Insider Trading and Earnings Reporting: Evidence of Managerial Optimism or Opportunism? (July 2003). Available at SSRN: https://ssrn.com/abstract=426500 or http://dx.doi.org/10.2139/ssrn.426500

Carol Marie Boyer

Long Island University CW Post ( email )

720 Northern Blvd.
Brookville, NY 11548
United States

Stephen J. Ciccone

University of New Hampshire - Department of Accounting & Finance ( email )

Durham, NH 03824
United States
603-862-3343 (Phone)
603-862-3383 (Fax)

HOME PAGE: http://pubpages.unh.edu/~sciccone

Wei Zhang (Contact Author)

SUNY at Albany ( email )

School of Business
Department of Accounting and Law
Albany, NY 12222
United States

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