What Do Insiders Know? Evidence from Insider Trading Around Share Repurchases and SEOs

Peter Cziraki, Evgeny Lyandres and Roni Michaely
Additional contact information
Peter Cziraki: University of Toronto - Department of Economics; Tilburg Law and Economics Center (TILEC)
Evgeny Lyandres: Boston University

No 19-11, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We examine the nature of information contained in insider trades prior to corporate events. Insiders’ net buying increases before open market share repurchase announcements and decreases before SEOs. Higher insider net buying is associated with better post-event operating performance, a reduction in undervaluation, and, for repurchases, lower post-event cost of capital. Insider trading predicts announcement returns and, for repurchases, the long-term drift following events. Overall, our results suggest that insider trades before corporate events contain information about changes both in fundamentals and in investor sentiment. Information about fundamentals is incorporated slowly into prices, while information about mispricing is incorporated faster.

Keywords: Insider Trading; Repurchases; Seasoned Equity Offers; Market Efficiency (search for similar items in EconPapers)
JEL-codes: G14 G30 G32 G35 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2019-03, Revised 2019-03
New Economics Papers: this item is included in nep-fmk
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: What do insiders know? Evidence from insider trading around share repurchases and SEOs (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1911

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