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Insider Purchase (insider + purchase)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

The Credibility of Voluntary Disclosure and Insider Stock Transactions

JOURNAL OF ACCOUNTING RESEARCH, Issue 4 2007
FENG GU
ABSTRACT We examine stock price reaction to voluntary disclosure of innovation strategy by high-tech firms and its relation with insider stock transactions before the disclosure. We find that, despite the qualitative and subjective nature of strategy-related disclosure, there is positive stock price reaction to the disclosure. The evidence suggests that investors view the disclosure as credible good news. We also find that the disclosure is associated with more positive stock price reaction when it is preceded by insider purchase transactions. This evidence is consistent with insider purchase enhancing the credibility of the disclosure. The credibility-enhancing effect is found to be stronger for firms with higher degrees of information asymmetry (younger firms, firms with lower analyst following, loss firms, and firms with higher research and development (R&D) intensity). Our evidence also indicates that predisclosure insider purchase is associated with greater future abnormal returns, suggesting that managers are privy to good news shortly before the disclosure. [source]

Intraday Behavior of Stock Prices and Trades around Insider Trading

FINANCIAL MANAGEMENT, Issue 1 2010
A. Can Inci
Our evidence indicates that insiders' trades provide significant new information to market participants and they are incorporated more fully in stock prices as compared to noninsiders' trades. We find that market professionals do not front-run insiders' trades. Both insiders' purchases and sales result in significant contemporaneous and subsequent price impact, while sales by large shareholders result in a contemporaneous stock price decline that is subsequently reversed. The arrival of insider purchases reverse the prevailing negative order imbalances from third party trades and lead to piggy-backing by market professionals resulting in subsequent market purchase orders as well as stock price increases. [source]

The Dog That Did Not Bark: Insider Trading and Crashes

THE JOURNAL OF FINANCE, Issue 5 2008
JOSE M. MARIN
ABSTRACT This paper documents that at the individual stock level, insiders' sales peak many months before a large drop in the stock price, while insiders' purchases peak only the month before a large jump. We provide a theoretical explanation for this phenomenon based on trading constraints and asymmetric information. A key feature of our theory is that rational uninformed investors may react more strongly to the absence of insider sales than to their presence (the "dog that did not bark" effect). We test our hypothesis against competing stories, such as insiders timing their trades to evade prosecution. [source]