What do insiders know? Evidence from insider trading around share repurchases and SEOs |
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| Institution: | 1. Darla Moore School of Business, University of South Carolina, Columbia, SC 29208, United States;2. School of Business, University of Kansas, Lawrence, KS 66045, United States;3. Fowler College of Business, San Diego State University, San Diego, CA 92182, United States;1. College of Business, Korea Advanced Institute of Science and Technology, 85 Hoegiro, Dongdaemun-gu, Seoul 130-722, Republic of Korea;2. Department of Finance, David Eccles School of Business, University of Utah, 1655 East Campus Center Drive, Salt Lake City, UT 84112-9301, USA;3. World Bank Group Singapore Office, World Bank, 10 Marina Boulevard, 018983, Singapore;4. Monetary Authority of Singapore, 10 Shenton Way, MAS Building, 079117, Singapore;1. Institute for Financial Economics and Statistics,University of Bonn, Adenauerallee 24-42, 53113 Bonn, Germany;2. University of Mannheim and Research Center SAFE, L9,1-2, 68131Mannheim, Germany |
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| Abstract: | We examine the nature of information contained in insider trades prior to corporate events. Insiders' net buying increases before open market share repurchase announcements and decreases before seasoned equity offers. Higher insider net buying is associated with better post-event operating performance, a reduction in undervaluation, and, for repurchases, lower post-event cost of capital. Insider trading also predicts announcement returns and long-term abnormal returns following events. Overall, our results suggest that insider trades before corporate events contain information about changes both in fundamentals and in investor sentiment. |
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