Insiders’ Market Timing and Real Activity: Evidence From an Emerging Market

Abstract

Earlier research on insider trading has documented unequivocally that officers, directors and controlling shareholders are in possession of valuable private information and exploit it profitably in security trading.¹ It is widely believed that the apparent informational asymmetry arises from the foreknowledge of public disclosures. Consequently, a number of studies have investigated the intensity of insider trading prior to corporate events, such as takeover bids (Seyhun, 1990), dividend and earnings announcements (John and Lang, 1991; Ke, Huddart and Petroni, 2003), stock repurchases (Lee, Mikkelson and Partch, 1992), or bankruptcies (Seyhun and Bradley, 1997).

The author wishes to thank participants of the International Conference on Emerging Markets and Global Risk Management organized by theWestminster Business School, the 8th Meeting of the New Zealand Finance Colloquium in Hamilton, the 3rd Annual Conference of the Research Centre on Modern Europe at the Wilfrid Laurier University in Canada and the research seminar at the European University Viadrina Frankfurt (Oder) provided useful remarks and comments. The suggestions made by Martin T. Bohl, Alireza Tourani-Rad, Aaron Gilbert, Shauna Selvarajah and Dobromir Tzotchev are also gratefully acknowledged. The author retains sole responsibility for all remaining errors.