Insider Filing Violations and Illegal Information Delay

Journal of Financial and Quantitative Analysis, volume 58, issue 5, 2023[10.1017/S0022109022000953]

56 Pages Posted: 18 Oct 2024

See all articles by Brandon N. Cline

Brandon N. Cline

Mississippi State University

Caleb Houston

University of Alabama at Birmingham

Date Written: January 31, 2022

Abstract

We document that a significant number of insiders violate the Securities and Exchange Commission (SEC)reporting requirements by filing open market transactions after the legally required deadline. Prior to Sarbanes-Oxley (SOX), 29% of transactions fell outside the required reporting window. Following SOX, 8% are delinquent. Violations cluster in periods of high information asymmetry, incentivizing insiders to keep trades private, and earn abnormal returns. Collectively, these findings suggest a subgroup of insiders personally benefit from violating SEC disclosure requirements. Evidence also suggests blockholders provide governance for violations. Guilty insiders experience a reduction in board seats and an increased likelihood of turnover.

Keywords: Insider Trading, SEC Regulation, Filing Violations, Information Asymmetry

JEL Classification: G14, G30, G38, K42

Suggested Citation

Cline, Brandon N. and Houston, Caleb, Insider Filing Violations and Illegal Information Delay (January 31, 2022). Journal of Financial and Quantitative Analysis, volume 58, issue 5, 2023[10.1017/S0022109022000953], Available at SSRN: https://ssrn.com/abstract=4954568 or http://dx.doi.org/10.1017/S0022109022000953

Brandon N. Cline

Mississippi State University ( email )

Mississippi State, MS 39762
United States
662.325.7477 (Phone)
662.325.1977 (Fax)

Caleb Houston (Contact Author)

University of Alabama at Birmingham ( email )

Birmingham, AL 35294-4460
United States

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