Opportunism, overconfidence and irrationality: A puzzling triad

Ali Altanlar, Shima Amini, Phil Holmes and Arman Eshraghi

International Review of Financial Analysis, 2023, vol. 88, issue C

Abstract: We empirically investigate managerial decision-making in a corporate context with combinations of rational/irrational managers and investors. There are noticeable differences in insider trading among these groups, particularly when exposed to market-wide and firm-level sentiment. We find that investor sentiment in the presence of managerial overconfidence has a significant impact on insider trading. We also show that managers behave opportunistically when timing stock splits and undertaking insider trading. Our findings linking splits to insider trading is robust under various specifications. In cases where irrational managers coexist with irrational investors, our study demonstrates important implications for the firms involved.

Keywords: Overconfidence; Irrationality; Insider trading; Sentiment; Stock split (search for similar items in EconPapers)
JEL-codes: G39 G40 G41 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:88:y:2023:i:c:s105752192300159x

DOI: 10.1016/j.irfa.2023.102643

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