Strategic trading by insiders in the presence of institutional investors

Lai T. Hoang, Marvin Wee and Joey Wenling Yang

Journal of Financial Markets, 2023, vol. 64, issue C

Abstract: We examine how competition to trade on information with institutional traders affects insider trading. We find insiders complete their trades quicker when trading on the same side as institutions, and this effect is more pronounced when insiders are more informed. These findings support information-based models, suggesting that insiders accelerate their trading as institutional traders are likely to become privy to the private information and compete with them. We identify two possible channels by which institutional investors acquire private information: when insiders and institutional traders share the same broker, and when firms’ headquarters are in the same city as institutional traders.

Keywords: Insider trading; Institutional trading; Information competition; Liquidity competition; Broker channel; Proximity channel (search for similar items in EconPapers)
JEL-codes: G10 G14 G23 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:64:y:2023:i:c:s138641812200091x

DOI: 10.1016/j.finmar.2022.100802

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