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Journal articles on the topic 'Insider econometrics'

Author: Grafiati

Published: 4 June 2021

Last updated: 18 June 2025

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1

Teodorovicz, Thomaz, Sandro Cabral, and Sergio Lazzarini. "Insider econometrics: a guide to management scholars." RAUSP Management Journal 54, no. 4 (2019): 446–58. http://dx.doi.org/10.1108/rausp-05-2019-0116.

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Purpose This paper aims to present a new trend in management research: the Insider Econometrics approach. Design/methodology/approach The authors argue that the use of internal organizational data not available in public sources can benefit both researchers interested in advancing theories and practitioners interested to improve the decision-making toward more solid and evidence-based grounds. Findings The authors demonstrate the subjects involved in Insider Econometrics realm and provide a framework to guide management scholars to successfully engage in research involving strong partnerships between academia and real world organizations. Originality/value This paper introduces a guide to Insider Econometric research to management scholars.

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2

Frick, Bernd, and Oliver Fabel. "Special issue “Insider Econometrics”." Journal of Business Economics 83, no. 2 (2013): 99–100. http://dx.doi.org/10.1007/s11573-013-0653-9.

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3

Firth, Michael, T. Y. Leung, and Oliver M. Rui. "Insider Trading in Hong Kong: Tests of Stock Returns and Trading Frequency." Review of Pacific Basin Financial Markets and Policies 14, no. 03 (2011): 505–33. http://dx.doi.org/10.1142/s0219091511002317.

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The main purpose of this paper is to examine the legal insider trading activities by directors of companies listed on the Hong Kong Exchange over the period 1993 to 1999. One characteristic of insider trading in Hong Kong is the high frequency of transactions and the large amounts of money involved. Inside purchases appear to signal and correct undervaluation and inside sales appear to signal and correct overvaluation. In contrast to research from Britain and the United States, insider sales are more informative than purchases. On average, insiders earn HK$91,297 per trade, while outsiders who mimic insiders' transactions earn minimal returns. Many firms suffer from infrequent trading and our results are consistent with directors engaging in inside transactions so as to help create a market for the shares. In additional tests, we find that the frequency of insider trading is a function of information asymmetry.

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4

Bartel, Ann, Casey Ichniowski, and Kathryn Shaw. "Using “Insider Econometrics” to Study Productivity." American Economic Review 94, no. 2 (2004): 217–23. http://dx.doi.org/10.1257/0002828041302145.

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5

Dalko, Viktoria, and Michael H. Wang. "Why is insider trading law ineffective? Three antitrust suggestions." Studies in Economics and Finance 33, no. 4 (2016): 704–15. http://dx.doi.org/10.1108/sef-03-2016-0074.

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Purpose The purpose of this paper is to uncover the essence of insider trading, explain why insider trading law is ineffective and provide implications of the effectiveness of the law. Design/methodology/approach This conceptual paper offers three propositions. The first two are based on a literature review of 62 articles in empirical research to develop an understanding of the essence of insider trading and identify the areas in which insider trading is ineffective. This analysis is used in the third proposition to provide a direction in suggesting effective measures to improve insider trading law. Findings The essence of insider trading is that corporate insiders exercise informational monopoly power over their trades. This understanding explains why insider trading law is ineffective because it has not taken away the monopoly power that corporate insiders possess and exercise. This understanding also leads to three antitrust suggestions aimed at improving insider trading law. Practical implications The findings may provide assistance to the lawmakers and regulators to make insider trading law more effective and enforcement more simplified. Originality/value This paper is of value to other researchers attempting to understand the essence of insider trading and to policymakers concerned about the existence of monopolistic behavior in the equity market and income inequality due to corporate insiders’ trading profit.

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6

Stotz, Olaf. "Germany’s New Insider Law: The Empirical Evidence after the First Year." German Economic Review 7, no. 4 (2006): 449–62. http://dx.doi.org/10.1111/j.1468-0475.2006.00129.x.

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Abstract This paper investigates insider trading activities in German stocks during the first year following implementation of the new Insider Law on 1 July 2002. It can be observed that insiders act as contrarian investors. They buy stocks after prices have fallen and sell stocks after prices have risen. In general, insider trades are very profitable. A typical stock purchased by an insider yields an abnormal return of almost 3 per cent during the 25 days following the transaction. In contrast, a typical stock that has been sold by insiders achieves an abnormal return of nearly -3 per cent over the same time period. Outsiders who copy the transactions of insiders can achieve nearly the same abnormal returns. Abnormal returns remain substantial even after transaction costs. The results suggest that prices of stocks in which insiders trade do not seem to be semi-strong efficient.

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7

Stotz, Olaf. "Do Retail Investors Follow Insider Trades?" German Economic Review 13, no. 3 (2012): 257–74. http://dx.doi.org/10.1111/j.1468-0475.2011.00556.x.

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Abstract On the basis of transaction records of retail investors provided by a large financial institution, this article analyzes whether, in the aggregate, retail investors do copy insider trades. The results suggest that insider trades are indeed an important piece of information for the transactions of retail investors, whose buy-sell imbalances (BSIs) increase in stocks which insiders buy, and whose BSIs decrease following insider sales. These results are robust when considering stock characteristics and general attention effects. With regard to trading insider stocks, retail investors’ preferences for growth and attention are less pronounced when compared with trades of noninsider stocks.

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8

Díaz-Vázquez, Pilar, and Dennis J. Snower. "Can Insider Power Affect Employment?" German Economic Review 4, no. 2 (2003): 139–50. http://dx.doi.org/10.1111/1468-0475.00076.

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Abstract Do firms reduce employment when their insiders (established, incumbent employees) claim higher wages? The conventional answer in the theoretical literature is that insider power has no influence on employment, provided that the newly hired employees (entrants) receive their reservation wages. The reason given is that an increase in insider wages gives rise to a countervailing fall in reservation wages, leaving the present value of wage costs unchanged. Our analysis contradicts this conventional answer. We show that, in the context of a stochastic model of the labor market, an increase in insider wages promotes firing in recessions, while leaving hiring in booms unchanged. Thereby insider power reduces average employment.

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9

Banerjee, Ajeyo, and E. Woodrow Eckard. "Why Regulate Insider Trading? Evidence from the First Great Merger Wave (1897–1903)." American Economic Review 91, no. 5 (2001): 1329–49. http://dx.doi.org/10.1257/aer.91.5.1329.

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We use event-time methodology to study legal insider trading associated with mergers circa 1900. For mergers with “prospective” disclosures similar to today's, we find substantial value gains at announcement, implying participation by “out-side” shareholders despite the absence of insider constraints. Furthermore, preannouncement stock-price runups, relative to total value gain, are no more than those observed for modern mergers. Insider regulation apparently has produced little benefit for outsiders, with the inside information-pricing function and related gains shifting to external “information specialists.” Other results suggest market penalties for nondisclosure; i.e., insider trading is less successful in a restricted information environment. (JEL G3, K2, L5, N2)

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10

Beason, Richard, Tu Thi Thanh Tran, Dong Phuong Dao, and Hong Minh Nguyen. "Insiders, Outsiders and Performance of Vietnamese Firms." Gadjah Mada International Journal of Business 24, no. 3 (2022): 324. http://dx.doi.org/10.22146/gamaijb.65194.

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The consensus in the finance literature is that a large proportion of inside ownership (defined as greater than 5% share ownership by non-institutional holders, managerial holdings, founding family holdings, cross-shareholdings by affiliated firms and ownership by creditors) tends to be associated with more unsatisfactory performance (as measured by ROE or ROA) when compared to firms with lower inside ownership, all else equal. However, this need not be the case if insiders act as monitors of the firm and have the same interest in returns as outsiders. Ownership structure and firm level financial performance have not been widely studied in Vietnam. Using data from 729 listed firms in Vietnam for 2018, we test the hypothesis that greater insider ownership has a negative impact on firm performance. We found that Vietnam's insiders play a monitoring role, exercising their relative power to ensure the firm's profitable functioning. These findings are inconsistent with research on Japanese groupings, as well as other findings. The Vietnamese stock market does not appear to be negatively affected by insider influence; indeed, insiders appear to act as positive monitors.

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11

Shin, Hyun Han, and Pyung Sig Yoon. "Does Absence of Insider Trades Before Seasoned Equity Offerings Provide Information to the Market?" Korean Journal of Financial Studies 52, no. 6 (2023): 947–78. http://dx.doi.org/10.26845/kjfs.2023.12.52.6.947.

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This study analyzes the interaction effect of short and long-run performance and insider trading with 1,099 seasoned equity offerings(SEOs) announced between 2004 and 2020. The major results of this study are as follows. First, insiders are net sellers prior to SEOs and the relationship between insider’s net purchase ratio and announcement effects is significantly positive. Second, the positive relationship holds only for net sell group, not for net buy group. Third, compared to firms in net sell group and net buy group, those in no trade group are marginal firms with worse operating performance, higher probability of delisting, smaller size, and lower return before SEOs, and lower ownership by largest shareholders. Fourth, regression analysis shows that announcement effect and long-run performance of no trade group is significantly more negative than net sell group and net buy group. To summarize, “dog that did not bark” effect exists in insider trading before SEOs and the absence of insider trades provide valuable information to the market.

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12

Shaw, Kathryn. "Insider econometrics: A roadmap with stops along the way." Labour Economics 16, no. 6 (2009): 607–17. http://dx.doi.org/10.1016/j.labeco.2009.09.001.

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13

Ryan, Stephen G., Jennifer Wu Tucker, and Ying Zhou. "Securitization and Insider Trading." Accounting Review 91, no. 2 (2015): 649–75. http://dx.doi.org/10.2308/accr-51230.

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ABSTRACT Securitizations are complex and opaque transactions. We hypothesize that bank insiders trade on private information about banks': (1) securitization-related recourse risks, (2) not-yet-reported current-quarter securitization income, and (3) securitization-based business model sustainability. We provide evidence that proxies for each of these types of insider information are positively associated with insider trading. Specifically, we find that net insider sales in the 2001Q2–2007Q2 pre-financial crisis quarters predict not-yet-reported non-performing securitized loans and securitization income for those quarters, and that net insider sales during 2006Q4 predict write-downs of securitization-related assets during the 2007Q3–2008Q4 crisis period. We find that net insider sales are more negatively associated with banks' subsequent stock returns in their securitization quarters than in other quarters. In supplemental analysis, we show that the above findings are driven by trades by banks' CEOs and CFOs, and that insiders avoid larger stock price losses through 10b5-1 plan sales than through non-plan sales. Data Availability: All data are available from public sources.

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14

Daher, Wassim, and Leonard J. Mirman. "Cournot duopoly and insider trading with two insiders." Quarterly Review of Economics and Finance 46, no. 4 (2006): 530–51. http://dx.doi.org/10.1016/j.qref.2005.11.006.

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15

Hsieh, Jim, and Qinghai Wang. "Insiders' Tax Preferences and Firms' Choices between Dividends and Share Repurchases." Journal of Financial and Quantitative Analysis 43, no. 1 (2008): 213–44. http://dx.doi.org/10.1017/s0022109000002805.

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AbstractThis paper investigates whether corporate payout policy is associated with insiders' share holdings and their tax preferences. We find that insider ownership and the implied tax liabilities are positively related to a firm's propensity to employ share repurchases. Firms with higher levels of or greater increases in insider ownership prefer stock repurchases to cash dividends. This relation is more significant in years when dividends were more tax disadvantaged relative to capital gains. Our findings are robust to the endogeneity of insider ownership and the inclusion of various control variables such as firm size, permanence of cash flows, growth opportunities, institutional ownership, and executive stock options. Overall, our results suggest that personal tax considerations from insiders affect corporate payout decisions.

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16

Engelen, Peter-Jan. "Structural Problems in the Design of Market Abuse Regulations in the EU." Journal of Interdisciplinary Economics 19, no. 1 (2007): 57–82. http://dx.doi.org/10.1177/02601079x07001900105.

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This article analyzes the regulatory and supervisory design of market abuse regulations in the EU in order to set the right incentives for corporate insiders to abstain from illegal trading. The analysis is illustrated by the Belgian insider trading law. Although the level of punishment seems to be rather high, the probability of conviction for insider trading is very low. The analysis suggests that the expected costs component of this crime is too low compared to the expected insider trading profits. In order to obtain a higher deterrence of the insider trading prohibition, a change in the design of the financial regulation and supervision must be made. To increase the probability of conviction broad investigative powers and the authority to impose administrative sanctions have to be assigned to the financial markets supervisor, as was recently the case with the European Market Abuse Directive. JEL classification: K42

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17

Beneish, Messod D., and Mark E. Vargus. "Insider Trading, Earnings Quality, and Accrual Mispricing." Accounting Review 77, no. 4 (2002): 755–91. http://dx.doi.org/10.2308/accr.2002.77.4.755.

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This paper investigates whether insider trading is informative about earnings quality and the valuation implications of accruals. We show that (1) the one-year-ahead persistence of income-increasing accruals is significantly lower when accompanied by abnormal insider selling and greater when accompanied by abnormal insider buying; (2) the accrual mispricing phenomenon observed in previous work (e.g., Sloan 1996) is due to the mispricing of income-increasing accruals; (3) one-year-ahead hedge returns to trading strategies based on the direction of accruals and insider trading significantly exceed those based on accruals alone; and (4) the lower persistence of income-increasing accruals accompanied by abnormal insider selling appears to be at least partly attributable to opportunistic earnings management. Our evidence suggests that market participants and researchers can use managers' contemporaneous trading in ex ante assessing the likelihood that the firms' accruals are of high or low quality, and in assessing the likelihood of earnings management. Our evidence suggesting that insiders trade on their knowledge of factors associated with accrual persistence is also relevant to policymakers charged with regulating insider trading.

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18

Capie, Forrest, and Naomi Lamoreaux. "Insider Lending." Economic History Review 48, no. 2 (1995): 418. http://dx.doi.org/10.2307/2598433.

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19

Cox, Raymond A. K., and Joel M. Shulman. "INSIDER IMPROPRIETIES." Financial Review 20, no. 3 (1985): 29. http://dx.doi.org/10.1111/j.1540-6288.1985.tb00207.x.

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20

Liu, Hong, Lina Qi, and Zaili Li. "Insider trading, representativeness heuristic insider, and market regulation." North American Journal of Economics and Finance 47 (January 2019): 48–64. http://dx.doi.org/10.1016/j.najef.2018.11.011.

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21

KEIBER, KARL LUDWIG. "INSIDER TRADING RULES AND PRICE FORMATION IN SECURITIES MARKETS: AN ENTROPY ANALYSIS OF STRATEGIC TRADING." International Journal of Theoretical and Applied Finance 09, no. 08 (2006): 1215–43. http://dx.doi.org/10.1142/s0219024906004013.

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This paper addresses the issue of how insider trading rules affect price formation in securities markets and suggests the application of information theory to market microstructure theory. We analyze a variant of the setting in [20] by simply introducing a more general criterion for informational efficiency borrowed from information theory — namely maximum information transmission. The analysis shows that both the insider's optimal trading strategy and the market price of the risky security depend on the insider trading restriction. Insider trading restrictions are reported to be detrimental to the liquidity of the securities market. We find that a unique insider trading rule exists which implements semi-strong form informational efficiency of the securities market. Alternative restrictions on insider trading give rise to either underreaction or overreaction in securities prices. Too strict insider trading rules are shown to account for excess volatility in securities prices. Contrary to common notion, the uninformed investors are shown to be hurt by too restrictive insider trading rules. We conclude that loose insider trading rules are preferred by the group of investors as a whole.

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22

Misra, Madhav. "Insider trading: Indian perspective on prosecution of insiders." Journal of Financial Crime 18, no. 2 (2011): 162–68. http://dx.doi.org/10.1108/13590791111127732.

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23

Stephenson, Kevin. "Insider trading during bankruptcy: Do insiders trade on private knowledge?" International Advances in Economic Research 2, no. 2 (1996): 196. http://dx.doi.org/10.1007/bf02295064.

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24

Lombardo, Stefano. "Some Reflections on the Self-insider and the Market Abuse Regulation – The Self-insider as a Monopoly-Square Insider." European Company and Financial Law Review 18, no. 1 (2021): 2–33. http://dx.doi.org/10.1515/ecfr-2021-0004.

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Abstract This article deals with the self-insider, i. e. the possible creation of the inside information by a person and its (abusive) exploitation. It describes the situation in Germany and in Italy and provides a taxonomy of the several cases of self-insider. The article then analyzes the case law of the ECJ and the MAR regulatory provisions for justifying/neglecting the existence of the self-insider (Article 9.5 and 9.6 MAR). Given the unclear regulatory answer regarding its sanctionability, the article proposes, based on the economics of MAR, a law and economics reason of why the self-insider sometime should be sanctioned, by describing it as a peculiar monopolistic behavior able to distort investors’ confidence and market integrity. Finally, the article suggests that the European legislator should explicitly deal with the problem.

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25

White, Roger M. "Insider Trading: What Really Protects U.S. Investors?" Journal of Financial and Quantitative Analysis 55, no. 4 (2019): 1305–32. http://dx.doi.org/10.1017/s0022109019000292.

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I examine the ability of the U.S. investor protection regime to limit insider trading returns, absent Section 16(b) of the Securities Exchange Act of 1934 (the short-swing rule). I find that in this setting, U.S. insiders execute short-swing trades that i) beat the market by approximately 15 basis points per day and ii) systematically divest ahead of disappointing earnings announcements. These results indicate that the bright-line rule restricting short-horizon round-trip insider trading plays a substantial role in protecting outside investors from privately informed insiders in the United States.

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Kim, Kyung Soon, Jin Hwon Lee, Yu-Jin Kim, and Yun W. Park. "Share Repurchases and Insider Trading Behavior: Evidence from Korea." Korean Journal of Financial Studies 52, no. 3 (2023): 379–419. http://dx.doi.org/10.26845/kjfs.2023.6.52.3.379.

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Using the context of open-market share repurchases in Korea, we examine insider trading behavior around share repurchase disclosures. In particular, we investigate managerial opportunism as a motivation for share repurchases by analyzing how insider trading behavior differs between direct share repurchases with a strong signal effect and indirect share repurchases with a weak signal effect. We obtained the following research findings. First, in direct share repurchases, insiders become net sellers after share repurchase disclosure. Second, insider net selling is the highest when a company’s stock is overvalued rather than when its liquidity is the highest. Third, insider buy trades are followed by insider sell trades in direct share repurchases. Fourth, this negative relationship is more pronounced in firms with low ownership concentration. Finally, in direct share repurchases, opportunistic firms experience inferior stock performance compared with non-opportunistic firms. Overall, our findings support the managerial opportunism hypothesis, that is, in direct share repurchases, managers engage in informed trades based on the market confirmation bias that a share repurchase is a signal of undervaluation.

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27

Liu, Hong, and Sarina Du. "Can an overconfident insider coexist with a representativeness heuristic insider?" Economic Modelling 54 (April 2016): 170–77. http://dx.doi.org/10.1016/j.econmod.2015.12.032.

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28

Forst, Arno, and Barry R. Hettler. "Disproportionate Insider Control and the Demand for Audit Quality." AUDITING: A Journal of Practice & Theory 38, no. 1 (2018): 171–91. http://dx.doi.org/10.2308/ajpt-52038.

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SUMMARY We examine the relationship between disproportionate insider control, enabled through dual-class share structures, and the demand for audit quality. Using a comprehensive hand-collected sample of U.S. dual-class firms, we find that, consistent with outside shareholders' increased demand for external monitoring, as well as self-bonding by entrenched insiders, disproportionate insider control is positively associated with the propensity to hire a Big 4 or industry specialist auditor, auditor independence, and audit fees. Corroborating a self-bonding explanation, additional analyses show that audit quality mitigates the negative association of disproportionate insider control and firm value. In expanded analyses, we also investigate the separate effects of insider voting and cash flow rights on the demand for audit quality in dual-class firms. Consistent with general agency theory, we find a decreased (increased) demand for audit quality from incentive-alignment (entrenchment) effects of ownership.

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Hong, Claire Yurong, and Frank Weikai Li. "The Information Content of Sudden Insider Silence." Journal of Financial and Quantitative Analysis 54, no. 4 (2018): 1499–538. http://dx.doi.org/10.1017/s0022109018001059.

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We present evidence of investors underreacting to the absence of events in financial markets. Routine-based insiders strategically choose to be silent when they possess private information not yet reflected in stock prices. Consistent with our hypothesis, insider silence following a routine sell (buy) predicts positive (negative) future returns, as well as fundamentals. The return predictability of insider silence is stronger among firms with a poor information environment and facing higher arbitrage costs, and a large fraction of abnormal returns concentrates on future earnings announcements. A long–short strategy that exploits insiders’ strategic silence behavior generates abnormal returns of 6% to 10% annually.

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Ellul, Andrew, and Marios Panayides. "Do Financial Analysts Restrain Insiders’ Informational Advantage?" Journal of Financial and Quantitative Analysis 53, no. 1 (2018): 203–41. http://dx.doi.org/10.1017/s0022109017000990.

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By collecting and disseminating price-sensitive information, financial analysts should reduce firm insiders’ informational advantage with a consequent impact on trading dynamics and market quality. We empirically examine the impact of complete analysts’ coverage termination on stocks’ liquidity, price discovery, and insider trading profitability. Termination leads to deteriorating liquidity and price efficiency, more informed trading, and higher profitability of insider trades. The magnitude of these effects depends on the strength of insiders’ ownership and on management’s decision whether to improve the firm’s information environment after coverage termination. Institutional investors alleviate, but do not eliminate, the negative effects of termination.

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31

Cao, Charles, Laura Casares Field, and Gordon Hanka. "Does Insider Trading Impair Market Liquidity? Evidence from IPO Lockup Expirations." Journal of Financial and Quantitative Analysis 39, no. 1 (2004): 25–46. http://dx.doi.org/10.1017/s0022109000003872.

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AbstractWe test the hypothesis that insider trading impairs market liquidity by analyzing intraday trades and quotes around 1,497 IPO lockup expirations in the period 1995–1999. We find that, while lockup expirations are associated with considerable insider trading for some IPO firms, they have little effect on effective spreads. By contrast, two other liquidity measures, quote depth and trading activity, improve substantially. In the 23% of lockup expirations where insiders disclose share sales, spreads actually decline. These findings indicate that a large body of well-informed, blockholding insider traders can enter a market from which they had previously been absent, and substantially change trading volume and share price without impairing market liquidity.

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Poelzig, Dörte, and Paul Dittrich. "Insider Dealing by Outsiders in the U. S. and EU." European Company and Financial Law Review 20, no. 4 (2023): 692–716. http://dx.doi.org/10.1515/ecfr-2023-0024.

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692The prohibition of insider dealing has its origins in U. S. law, the structural features of which have also influenced EU insider law. Today the dogmatic approaches of the two insider law systems differ diametrically. Particularly in dealing with investors outside the issuer, so-called outsiders, the two legal systems differ in terms of both the manner and the scope of covered transactions. According to our understanding outsiders are investors who, neither through their position within the issuer nor through the exercise of a profession for the issuer, have a relationship with the issuer that allows privileged access to inside information. We will lay out the differences between EU and U. S. law by reference to the recent decision of a U. S. Court in U. S. Securities and Exchange Commission (SEC) v. Panuwat, where the court approved the so-called shadow trading theory of the SEC. Whereas this decision has attracted a lot of attention in the U. S., we argue, that shadow trading is undoubtedly covered by EU insider law due to the broad principle of information parity. However, because of its broad scope EU insider law applies basically to all investors who possess inside information and hence may also prohibit transactions by outsiders which might be useful for capital markets, such as trading by financial analysts or whistle blowers. We will therefore scrutinize whether and how far financial analysts or whistleblowers are privileged by Recital 28 of the Market Abuse Regulation (MAR), which only applies to research based on publicly available data, but does not specify when information is publicly available.Whereas in regard to outsiders, the EU insider dealing law goes sometimes too far at the substantive level, in enforcement matters it is too restrictive on the other side. This becomes obvious when we look at politicians which are involved in legislation and hence have access to material information for many issuers. In the U. S., the SEC – acting as a driving force in the U. S. when it comes to the enforcement of the insider dealing prohibition – but also the legislator itself have already become active. Against this background, we examine what instruments EU insider law might provide to detect insider dealing by politicians and other outsiders and show that adapting and extending the existing rules may be a feasible way forward.

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33

Avgoustaki, Argyro. "Productivity Gains of Training: An Insider-Econometrics Investigation and a Replication." Academy of Management Proceedings 2016, no. 1 (2016): 10661. http://dx.doi.org/10.5465/ambpp.2016.10661abstract.

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34

Bogaard, Hein, and Jan Svejnar. "Incentive pay and performance: Insider econometrics in a multi-unit firm." Labour Economics 54 (October 2018): 100–115. http://dx.doi.org/10.1016/j.labeco.2018.07.001.

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35

Dennert, Jürgen. "Insider Trading." Kyklos 44, no. 2 (1991): 181–202. http://dx.doi.org/10.1111/j.1467-6435.1991.tb02096.x.

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36

GRÉGOIRE, PHILIPPE. "INSIDER TRADING AND VOLUNTARY DISCLOSURE." International Journal of Theoretical and Applied Finance 11, no. 02 (2008): 143–62. http://dx.doi.org/10.1142/s0219024908004750.

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We set up a model to study the voluntary disclosure of information by insiders of publicly traded companies. We consider a trading framework as in [14] with many assets and one insider per asset. There is one discretionary liquidity trader who can allocate his trades across the different assets and many noise traders who trade with equal intensity in all assets. Before trade begins, insiders can disclose information in order to attract the discretionary liquidity trades. We show that if the level of noise trading is above a certain threshold, then there is an equilibrium where all insiders do not disclose any information. Below this threshold, equilibria are such that some information is always revealed by insiders. We also find that the greater the number of assets, the smaller the intensity of noise trading must be in order to induce insiders to disclose some information, and we find that insiders reveal all their information when the intensity of noise trading approaches zero.

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37

Lenkey, Stephen L. "Cancellable Insider Trading Plans: An Analysis of SEC Rule 10b5-1*." Review of Financial Studies 32, no. 12 (2019): 4947–96. http://dx.doi.org/10.1093/rfs/hhz035.

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Abstract Rule 10b5-1 enables insiders to preplan future trades before becoming informed. Within a strategic rational expectations equilibrium framework, I characterize an insider’s unique optimal trading plan, which balances portfolio diversification against exploitation of the rule’s selective termination option. Because the rule reduces adverse selection and provides insurance against bad outcomes, the rule generally improves welfare for both the insider, who later becomes informed, and uninformed outsiders, provided there exists a sufficient degree of information asymmetry. Eliminating the rule’s selective termination option results in an even greater welfare improvement under a large subset of parametric conditions. Received March 9, 2018; editorial decision January 11, 2019 by Editor Wei Jiang.

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Rochet, J. C., and J. L. Vila. "Insider Trading without Normality." Review of Economic Studies 61, no. 1 (1994): 131–52. http://dx.doi.org/10.2307/2297880.

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39

Gillis, John G., and Glenn J. Ciotti. "Insider Trading Update." Financial Analysts Journal 48, no. 6 (1992): 46–51. http://dx.doi.org/10.2469/faj.v48.n6.46.

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40

AKBAS, FERHAT, CHAO JIANG, and PAUL D. KOCH. "Insider Investment Horizon." Journal of Finance 75, no. 3 (2020): 1579–627. http://dx.doi.org/10.1111/jofi.12878.

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41

King, Mervyn, Ailsa Roell, John Kay, and Charles Wyplosz. "Insider Trading." Economic Policy 3, no. 6 (1988): 163. http://dx.doi.org/10.2307/1344507.

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42

Dissanaike, Gishan, and Kim-Hwa Lim. "Detecting and Quantifying Insider Trading and Stock Manipulation in Asian Markets." Asian Economic Papers 14, no. 3 (2015): 1–20. http://dx.doi.org/10.1162/asep_a_00368.

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This paper focuses on insider trading, where the perpetrators exploit market sensitive information to earn profits or avoid losses. The paper's objectives are as follows. First, we seek to examine whether we can detect possible insider trading and stock manipulation and react in almost real time, even though insider trading activity is intended to be evasive. Second, we also estimate the extent of illicit profits (or loss avoidance) that might have been earned. Finally, we analyze, if detection is possible, the appropriate response for regulators and other market participants. We do not restrict our study to cases where corporate events have materialized, as we hope to capture insider trading surrounding market rumors and failed corporate events. Because insider trading is executed with the aim of being evasive and undetected, it is impossible to conclude with certainty. Nevertheless, using a hypothesized model based on how insiders and stock manipulators trade, we detect price patterns that are consistent with their objective to maximize profits and at the same time be evasive.

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43

Simser, Jeffrey. "Culpable insiders – the enemy within, the victim without." Journal of Financial Crime 21, no. 3 (2014): 310–20. http://dx.doi.org/10.1108/jfc-11-2013-0068.

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Purpose – The purpose of this paper is to explore the role of the culpable insider and the predatory criminal in fraud and deception. Design/methodology/approach – Two groupings of fraud are considered in this paper. Insider fraud consists of a person within an organization misusing their position for corrupt self-dealing, asset misappropriation and financial statement fraud. Case studies are discussed, offering differing perspectives on the role of insiders. Fraudsters use technology, like malware, to take on the mantle of an insider to facilitate their larceny. This paper also looks at the role of the insider with predatory frauds. Findings – Most enterprises, be they public entities or private firms, are at risk of internal fraud. Internal financial controls are the first line of defence. In tougher economic times, when enterprises run on the tightest of margins, control mechanisms are at risk of being weakened at the altar of efficiency. Firms can also adopt cultures that deter frauds, either through policies on whistle-blowers or through simple employee screening procedures. For predatory frauds, the basic warning flag can be summed up with the cliché: if something seems too good to be true, it probably is. Originality/value – This paper synthesizes research on fraud and the role that an insider can play as well as the role of a predatory fraudster.

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Levine, Ross, Chen Lin, and Lai Wei. "Insider Trading and Innovation." Journal of Law and Economics 60, no. 4 (2017): 749–800. http://dx.doi.org/10.1086/696384.

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45

Lee, Wayne Y., and Michael E. Solt. "Insider trading." Journal of Portfolio Management 12, no. 4 (1986): 65–71. http://dx.doi.org/10.3905/jpm.1986.409069.

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46

Hallman, Nicholas, Andrew J. Imdieke, Kyonghee Kim, and Raynolde Pereira. "On the Relation between Insider Trading and Going Concern Opinions." AUDITING: A Journal of Practice & Theory 39, no. 1 (2020): 43–70. http://dx.doi.org/10.2308/ajpt-52592.

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SUMMARY Recent research suggests that insiders of distressed firms, fearing legal jeopardy, pressure auditors not to issue going concern opinions (GCOs) for periods in which they undertake abnormally large sales of their shares. We propose and evaluate an alternative explanation that managers anticipate GCOs and time their trades to avoid insider sales in the GCO year (hereafter, the timing hypothesis). Consistent with the timing hypothesis, we find that insider sales increase two to four years prior to the issuance of a GCO and then decline in the year of GCO. Additional analysis suggests that insiders' anticipatory trading is enabled, at least in part, by early communication between auditors and their most important clients regarding the likelihood of a GCO. These early communications appear to reduce the likelihood of dismissal when auditors do eventually issue a GCO.

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Ichniowski, Casey, and Kathryn Shaw. "Beyond Incentive Pay: Insiders' Estimates of the Value of Complementary Human Resource Management Practices." Journal of Economic Perspectives 17, no. 1 (2003): 155–80. http://dx.doi.org/10.1257/089533003321164994.

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Do human resource management (HRM) practices, such as incentive pay, teamwork, training, and careful screening practices, raise productivity, and if so, under what conditions does productivity rise? Recently, this question has been a central focus in organizational and personnel economics. We emphasize the value of a new research approach – an approach we label “insider econometrics”–that is aimed going deep inside businesses to obtain data and insights into the ways in which HRM practices affect specific production processes. We conclude that sets of complementary HRM practices appear to raise performance, but that some firms, such as those that make complex products or those that are starting up brand new facilities, benefit more from these practices.

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Dechow, Patricia M., Alastair Lawrence, and James P. Ryans. "SEC Comment Letters and Insider Sales." Accounting Review 91, no. 2 (2015): 401–39. http://dx.doi.org/10.2308/accr-51232.

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ABSTRACT We document that insider trading is significantly higher than normal levels prior to the public disclosure of SEC comment letters relating to revenue recognition. Furthermore, insider trading is triple its normal level for firms with high short positions. We find a small negative return at the comment letter release date and a negative drift in returns of 1 to 5 percent over the next 50 days following the release. We also find that greater pre-disclosure sales are associated with a stronger negative drift. This evidence suggests that insiders appear to benefit from trading prior to revenue recognition comment letters. We investigate whether the delayed price reaction to comment letter releases is due to investor inattention. Consistent with this explanation, we document that comment letters are downloaded infrequently from EDGAR in the days following their public disclosure. JEL Classifications: M41; M48; K42

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Schreiber, Sven. "Pensions and Insider-Outsider Unemployment." Journal of Institutional and Theoretical Economics 161, no. 4 (2005): 708. http://dx.doi.org/10.1628/093245605775075997.

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Blanchflower, David G., Andrew J. Oswald, and Mario D. Garrett. "Insider Power in Wage Determination." Economica 57, no. 226 (1990): 143. http://dx.doi.org/10.2307/2554158.

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