The Effects of Insider Trading Restrictions: Evidence From Historical Dividend Initiations and Omissions

Tanimura, Joseph K.; Wehrly, Eric W.

doi:10.1111/j.1475-6803.2011.01307.x

Cited by 4 publications

(2 citation statements)

References 70 publications

(107 reference statements)

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“…Some other studies refer to insider trading to represent trading by insiders (mangers or directors). See Tanimura and Wehrly () for a review of regulations imposed on trading by insiders.…”

mentioning

confidence: 99%

Impact of the Galleon Case on Informed Trading Before Merger Announcements

Chira

Madura

2013

J of Financial Research

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On October 16, 2009, the U.S. government charged Galleon hedge fund founder Raj Rajaratnam and five others with insider trading, in what was described by a key prosecutor overseeing the case as a "wake-up call to Wall Street and to every hedge fund manager." We find that the mean abnormal stock price runup of targets (a measure of informed trading) during the 26 months since the inception of the Galleon case declined from 5.12% to 2.84%. The early evidence strongly suggests that the Galleon case has sent a clear signal to the traders, and that the traders are listening.

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“…Some other studies refer to insider trading to represent trading by insiders (mangers or directors). See Tanimura and Wehrly () for a review of regulations imposed on trading by insiders.…”

mentioning

confidence: 99%

Impact of the Galleon Case on Informed Trading Before Merger Announcements

Chira

Madura

2013

J of Financial Research

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“…310 Tanimura recently found that the SEC's initial enforcement actions in the 1960s had meaningful effects in reducing insider trading volume and profitability. 311 Similarly, Piotroski and Roulstone found that enactment of ITSFEA and the earlier Insider Trading Sanctions Act (ITSA) reduced insider trading by deterring insiders from engaging in more blatant forms of the practice. 312 Grishenko and colleagues found less insider trading in countries that enforce insidertrading laws and provide better investor protection.…”

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confidence: 99%

Insider Trading as a Signaling Device

Prentice

Donelson

2010

American Business Law J

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Essays on implied dividends

Guerrero¹

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This thesis uses option-implied dividends to investigate research questions in three different areas of finance: the ex-dividend day drop and related option pricing errors; insider trading on superior dividend knowledge; and analyst dividend forecast accuracy, incorporation of market information, and market response to analyst revisions.The first chapter investigates market expectations of the ex-dividend stock price decline implied by American options. Using a much larger set of option transactions than previous studies, I find the ex-dividend drop-o implied by option prices is significantly less than the cash dividend. The second focus of this study analyses factors that affect option pricing errors such as thin trading, nonsynchronous trading, and lower dividend yields. I also find an increase in option pricing errors for deep in-the-money, deep out-of-the-money, and put-call pairs that cross the bid-ask spread.The second chapter investigates, using a measure of dividends surprise calculated by put-call parity, whether analysts update their forecasts in response to new market information, and likewise, whether the market updates dividend expectations in response to analyst forecast revisions. I find that only superior analysts respond to changes in market information and that the market does not respond to changes in either non-superior or superior analyst forecast revisions. I also compare the accuracy of forecasts and determine the order of increasing forecast precision as non-superior individual analysts, superior individual analysts, option-implied, and consensus analyst forecasts.The final chapter investigates whether insiders trade on their superior knowledge of future changes in dividend policy. I use the difference between the dividend implied by option transaction prices before and after the announcement as a proxy for dividend surprise. I find that CEOs are more likely to accumulate stock preceding an announcement for an expected increase in the cash dividend. Whereas, Non-director executives and Other Officers and block-holders are more likely to accumulate stock for ii iii an unexpected increase. Directors were less likely to accumulate stock for an unexpected increase and I attribute this to their presence on the firm board. I also find that Directors are more likely to exercise their call options to acquire stock preceding an announcement for an expected increase in the cash dividend. However, Directors and Other Officers and block-holders are less likely to exercise their options for an unexpected increase in the cash dividend. The results are consistent with the information hierarchy hypothesis.

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The Effects of Insider Trading Restrictions: Evidence From Historical Dividend Initiations and Omissions

Cited by 4 publications

References 70 publications

Impact of the Galleon Case on Informed Trading Before Merger Announcements

Impact of the Galleon Case on Informed Trading Before Merger Announcements

Insider Trading as a Signaling Device

Essays on implied dividends

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