Do Brokers of Insiders Tip Other Clients?

William J. McNally (), Andriy Shkilko () and Brian F. Smith ()
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William J. McNally: Financial Services Research Centre, Lazaridis School of Business and Economics, Wilfrid Laurier University, Waterloo, Ontario N2L 3C5, Canada
Andriy Shkilko: Financial Services Research Centre, Lazaridis School of Business and Economics, Wilfrid Laurier University, Waterloo, Ontario N2L 3C5, Canada
Brian F. Smith: Financial Services Research Centre, Lazaridis School of Business and Economics, Wilfrid Laurier University, Waterloo, Ontario N2L 3C5, Canada

Management Science, 2017, vol. 63, issue 2, 317-332

Abstract: We examine trading activity around insider transactions on the Toronto Stock Exchange and find evidence that some traders mimic insider positions. Our unique data set allows us to establish a direct connection between insiders, their brokerages, and the brokerages’ other clients. The findings are consistent with the possibility that some brokerages tip their clients about insider trades. Insiders in our sample have good timing; returns are usually positive (negative) after insider purchases (sales). Insiders’ good timing translates to the mimicking transactions, which appear to be profitable net of trading costs. Evidence consistent with tipping is observed mainly for smaller independent brokerages. This paper was accepted by Brad Barber, finance .

Keywords: insider trading; broker; tipping (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:63:y:2017:i:2:p:317-332

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