What do insiders know? Evidence from insider trading around share repurchases and SEOs

Cziraki, Peter; Lyandres, Evgeny; Michaely, Roni

doi:10.1016/j.jcorpfin.2019.101544

Cited by 57 publications

(19 citation statements)

References 74 publications

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“…The significant positive coefficients of each abnormal insider trading measure in these columns show that the trades of insiders during the pre‐rumor period can help predict rumor announcement returns; specifically, insider net buying before a takeover rumor is positively associated with significantly higher abnormal returns on the rumor date. This evidence is consistent with the research of Cohen, Malloy, and Pomorski (2012) and Jenter (2005) who find that insider trading is positively related to future returns, as well as with the work of Cziraki et al (2019), who find significantly higher market reactions for firms that exhibit a high level of insider net buying within the 6 months prior to share repurchases and seasoned equity offerings.…”

Section: Resultssupporting

confidence: 91%

“…In each case, the control firm is chosen as the firm with the smallest Mahalanobis distance (relative to the rumored firm) at the end of fiscal year −2, where year 0 is the fiscal year in which the takeover rumor occurs. In line with Cziraki, Lyandres, and Michaely (2019), past insider trading is measured as (number of shares purchased − number of shares sold)/(number of shares purchased + number of shares sold) during year −2, the past stock return is measured as the market‐adjusted average daily stock return (based on the equally weighted CRSP market index) during fiscal year −2, and the past trading volume is the natural logarithm of the average monthly stock trading volume during year −2.…”

Section: Methodssupporting

confidence: 83%

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Insider trading in rumored takeover targets

Davis

Khadivar

Pukthuanthong

et al. 2020

Euro Fin Management

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We examine insider trading surrounding takeover rumors in a sample of 1,642 publicly traded US firms.Using difference-in-differences regressions, we find that insider net purchases increase within the year prior to the first publication of a takeover rumor, particularly when rumor articles are either accurate (lead to a takeover announcement) or informative (provide substantial justification for the rumor's publication). Moreover, we find abnormal insider trading to be a significant predictor of takeover announcements occurring within the following year. Finally, passive net purchasing (i.e., selling less rather than buying more) is more pronounced among managing insiders than among non-managing insiders.

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Section: Resultssupporting

confidence: 91%

Section: Methodssupporting

confidence: 83%

Insider trading in rumored takeover targets

Davis

Khadivar

Pukthuanthong

et al. 2020

Euro Fin Management

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show abstract

“…More specifically, we also corroborate Sloan and You (2015) as well as Cziraki et al (2017) regarding the impact of own stock trading on an overall firm strategy. There is a strategy of wealth transfer from third-party investors to the firm itself using stock undervaluation as the key driver for this transfer.…”

supporting

confidence: 77%

“…As referred to above, there is information within each corporate or individual own stock transaction. Cziraki et al (2017) focus on the interactions between firms' strategic trading decisions and insiders. In their work, they show that normally the market takes time to absorb all the information regarding insider trading previous to event announcements.…”

mentioning

confidence: 99%

Timing the market with own stock: an extensive analysis with buying and selling evidence

Santos

Gama

2019

IJMF

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Purpose Are firms able to time the market? The purpose of this paper is to focus on the study of own stock trading, emphasizing both repurchase and resell operations on the open market as well as over the counter. Design/methodology/approach The authors use data on 37,997 own stock transactions from 2005 to 2015 of Euronext Lisbon listed firms. Following Dittmar and Field (2015), this paper uses relative transaction prices to ascertain the relative performance of own stock transactions, in the open market and over the counter. Findings Results show that firms can time both repurchases as well as resales. Firms repurchase (resell) at lower (higher) prices than those prevailing in the market. Moreover, market-timing ability proves to be higher after the bailout period and to be influenced by the own stock trading frequency. Trading on the open market allows for increased timing ability for own stock repurchasing and reselling activity. Finally, results show seasonal effects both in repurchase and resale performance. Also, more efficient but less valuable firms are more likely to be successful in timing the market. Originality/value The authors study both the repurchasing and the reselling activity of the same set of firms, of already issued stock, using high-frequency (daily) data. In addition, the authors study own stock trading both in the open market and OTC, and also study the impact of a major economic shift on the firms’ ability to time the market.

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“…In line with this theoretical framework, Morck et al (2000), Piotroski and Roulstone (2004), and Aktas et al (2008) provide empirical evidence suggesting that insider trading leads to market efficiency. Recent evidence is also consistent with this notion as it shows that insider trading can predict abnormal returns around corporate events (Cziraki et al, 2019;Rossi & Sahlström, 2019).…”

Section: Value Relevance Of Insider Tradingsupporting

confidence: 58%

Network centrality and value relevance of insider trading: Evidence from Europe

Afzali

Martikainen

2021

The Financial Review

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We examine the value relevance of insider trades in Europe and find that both purchases and sales of well-connected insiders are positively associated with long-term abnormal returns. We argue that the market perceives the purchases of networked insiders as more informative, leading to higher returns. For sales of networked insiders, the market decreases their negative information content, leading to lower negative returns. Our results do not support the view that insiders use their informational advantage to extract economic rents in the form of dollar profits. We posit that they use their networks to provide signals to the market when trading.

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What do insiders know? Evidence from insider trading around share repurchases and SEOs

Cited by 57 publications

References 74 publications

Insider trading in rumored takeover targets

Insider trading in rumored takeover targets

Timing the market with own stock: an extensive analysis with buying and selling evidence

Network centrality and value relevance of insider trading: Evidence from Europe

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