Effect of pre-disclosure information leakage by block traders

Tai-Young Kim

Journal of Risk Finance, 2019, vol. 20, issue 5, 470-483

Abstract: Purpose - This paper aims to investigate pre-disclosure information leakage by block traders and market reactions to disclosures of off-hours block trading compared to off-market trading. Design/methodology/approach - Stock responses were analyzed based on timely disclosures regarding Korean firms’ decisions to dispose of their own shares to improve their financial structures. Findings - The results showed that pre-disclosure abnormal returns were generated in off-hours block trading. In contrast, on disclosure days, the returns for off-hours block trading were significantly lower than those for off-market trading. It was consistent with prior studies, indicating that block traders were related to information leakage and caused moral hazard problems. Originality/value - The comparison between off-hours block trading and off-market trading provides important insights regarding block traders’ behavior. This study’s findings on the leakage of information from block traders indicate the need for firms to exercise caution when using block traders.

Keywords: Information leakage; Block traders; Off-hours block trading; Off-market trading; Treasury stock disposal method (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:jrfpps:jrf-09-2018-0134

DOI: 10.1108/JRF-09-2018-0134

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