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Insider trading ahead of cyber breach announcements

Zhaoxin Lin, Travis R.A. Sapp, Jackie Rees Ulmer and Rahul Parsa

Journal of Financial Markets, 2020, vol. 50, issue C

Abstract: Stock market reactions to cybersecurity breach announcements are generally negative. We find significant evidence of opportunistic insider trading, with insiders saving an average of $35,009 due to timely selling in the three months before the announcement of a cybersecurity breach. Late filing violations by insiders are more likely to occur near the announcement of a cyber breach. The bulk of opportunistic trading tends to occur 55–72 days before the public announcement. The results lend support to the U.S. Security and Exchange Commission’s recently announced goal of tightening restrictions on insider trading ahead of cyber breach announcements.

Keywords: Insider trading; Form 4; Cybersecurity; Data breach; Opportunistic trading; SEC enforcement action; Asymmetric information (search for similar items in EconPapers)
JEL-codes: G14 G30 K24 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.finmar.2019.100527

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Journal of Financial Markets is currently edited by B. Lehmann, D. Seppi and A. Subrahmanyam

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