What Do Independent Directors Know? Evidence from Their Trading

Enrichetta Ravina and Paola Sapienza ()

No 6046, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We compare the trading performance of independent directors and other officers of the firm. We find that independent directors earn positive and substantial abnormal returns when they purchase their company stock, and that the difference with the same firm's officers is relatively small at most horizons. The results are robust to controlling for firm fixed effects and to using a variety of alternative specifications. Executive officers and independent directors make higher returns in firms with weaker governance and the gap between these two groups widens in such firms. Independent directors who sit in audit committees earn higher return than other independent directors at the same firm. Finally, independent directors earn significantly higher returns than the market when they sell the company stock in a window before bad news and around a restatement announcement.

Keywords: Boards of directors; Corporate governance; Independent Directors (search for similar items in EconPapers)
JEL-codes: G34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-bec and nep-cfn
Date: 2007-01
View list of references

Downloads: (external link)
http://www.cepr.org/pubs/dps/DP6046.asp (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: What Do Independent Directors Know? Evidence from Their Trading (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:cpr:ceprdp:6046

Ordering information: This working paper can be ordered from
http://www.cepr.org/pubs/dps/DP6046.asp

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers
Address: Centre for Economic Policy Research, 53--56 Great Sutton Street, London EC1V 0DG
Series data maintained by ().