Insider trading around open-market share repurchases |
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Authors: | Fei Leng Kevin Min Zhao |
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Institution: | 1. Milgard School of Business, University of Washington Tacoma, Tacoma, WA, USA 2. Department of Economics and Finance, Middle Tennessee State University, Murfreesboro, TN, USA
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Abstract: | We examine insider trading around open-market share repurchases and find that insiders trade passively in 3 months prior to repurchase announcements and in up to 12 months following the announcements. Furthermore, both pre-announcement and post-announcement abnormal insider trading is unrelated to short-term announcement returns but correlated with long-term post-announcement returns. Our results indicate that corporate insiders trade passively around repurchase announcements in accordance with their perceived undervaluation to exploit the long-run abnormal stock returns related to the events. |
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