Tone emphasis and insider trading |
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| Institution: | 1. China Europe International Business School, Department of Finance and Accounting, Shanghai, China;2. Shanghai University of Finance and Economics, Institute of Accounting and Finance, Shanghai, China;3. Shanghai University of Finance and Economics, Institute of Accounting and Finance, Shanghai, China;1. School of Finance, Jiangxi University of Finance and Economics, China;2. School of Management, Shandong University, China;3. School of Economics and Finance, Massey University, New Zealand;1. Department of Accounting, Antai College of Economics and Management, Shanghai Jiao Tong University, 1954 Huashan Road, Shanghai, 200030, China;2. Department of Accounting, Business School, National University of Singapore, Mochtar Riady Building, BIZ 1, # 07-30, 15 Kent Ridge Drive, 119245, Singapore;3. Institute of Accounting and Finance, Shanghai University of Finance and Economics, No.777 Guoding Road, Shanghai 200433, China;1. Central Bank of Chile, Agustinas 118, 8340454 Santiago, Chile;2. Hunter College & Graduate Center, City University of New York, 695 Park Ave, New York NY 10065, United States;1. Department of Finance, NUS Business School, National University of Singapore, 15 Kent Ridge Drive, BIZ 1 #7-63, 119245, Singapore;2. Department of Accounting, School of Economics and Management, Beihang University, 37 Xueyuan Road, Haidian District, Beijing, 100191, P.R. China;3. Division of Accounting, Nanyang Business School, Nanyang Technological University, 50 Nanyang Avenue, 639798, Singapore |
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| Abstract: | In this study, we examine whether emphasized tone in earnings releases systematically predict managers' insider trading activities in the post earnings releases periods and whether managers' choices of tone placement in earnings releases are motivated by opportunistic incentives. We find that, holding constant the net tone of the overall document, managers make more insider sales (purchases) immediately after earnings releases when positive (negative) tone is presented more prominently in the document. In addition, we document that the relation between tone emphasis and the observed insider trading activities is more (less) pronounced when insiders have greater information advantage or when a firm's overall information environment is more opaque (when a firm has better corporate governance). Overall, our findings suggest that managers use narrative characteristics strategically to facilitate their insider trading and achieve personal gains. |
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