Institutional Investors and Insider Trading Profitability

Robert Bricker and Garen Markarian

European Accounting Review, 2015, vol. 24, issue 3, 495-518

Abstract: This study examines the relationship between institutional ownership and the profitability of insider trading. A priori the relationship is not clear. On the one hand, institutions possess superior information that erodes insider advantages and are also active in monitoring. On the other hand, institutions could treat insider trading as an incentivizing mechanism to induce manager effort, leading to improved aggregate shareholder welfare. The results indicate that, on average, institutional ownership is negatively related to the profitability of insider trading, and this relationship derives from both direct monitoring and trading/pricing. Further analysis indicates that this relationship is concentrated for insider sales. In contrast, the findings reveal a positive relationship between institutions and the profitability of insider purchases, indicating an incentivizing role.

Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://hdl.handle.net/10.1080/09638180.2015.1040045 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:euract:v:24:y:2015:i:3:p:495-518

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/REAR20

DOI: 10.1080/09638180.2015.1040045

Access Statistics for this article

European Accounting Review is currently edited by Laurence van Lent

More articles in European Accounting Review from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().