Jeopardy, Non-Public Information, and Insider Trading Around SEC 10-K and 10-Q Filings
51 Pages Posted: 20 Jun 2006
Evidence contrasting U.S. insider trades in high- and low-jeopardy periods and across firms at high and low risk for 10b-5 litigation indicates that insiders condition their trades on foreknowledge of price-relevant public disclosures, but avoid profitable trades when the jeopardy associated with such trades is high, such as immediately before earnings announcements. Insiders avoid profitable trades before quarterly earnings are announced and sell (buy) after good (bad) news earnings announcements. Insiders trade most heavily after earnings announcements and profit from foreknowledge of price-relevant information in the forthcoming Form 10-K or 10-Q filing.
Keywords: accounting standards, government regulation, insider trading, litigation risk, stock-based compensation
JEL Classification: J33, K22, M12, M41
Suggested Citation: Suggested Citation