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Bankruptcy and Insider Trading: Differences between Exchange-Listed and OTC Firms

Author

Listed:
  • Gosnell, Thomas
  • Keown, Arthur J
  • Pinkerton, John M

Abstract

Over the two-year period prior to the bankruptcy announcement, insider trading is significantly greater for over-the-counter bankrupt firms, but not for exchange-listed firms, than for an industry-size matched sample of nonbankrupt firms. In addition, the level of insider selling increases over the final five months leading to the first public announcement of over-the-counter firms. Finally, firms displaying the most negative price reaction over the announcement period are found to have a significantly larger proportion of insider selling than other firms. Copyright 1992 by American Finance Association.

Suggested Citation

  • Gosnell, Thomas & Keown, Arthur J & Pinkerton, John M, 1992. "Bankruptcy and Insider Trading: Differences between Exchange-Listed and OTC Firms," Journal of Finance, American Finance Association, vol. 47(1), pages 349-362, March.
    • Handle: RePEc:bla:jfinan:v:47:y:1992:i:1:p:349-62
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    Cited by:

    1. Kathleen M. Kahle & Ralph A. Walkling, "undated". "The Impact of Industry Classifications on Financial Research," Research in Financial Economics 9607, Ohio State University.
    2. Nadia Belkhir Boujelbene & Abdelfatteh Bouri & Jean-Luc Prigent, 2014. "Corporate Governance and Market Microstructure: Evidence on Institutional Investors in the Tunisian Stock Exchange," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(2), pages 58-71, April.
    3. Park, Young S. & Lee, Jaehyun, 2010. "Detecting insider trading: The theory and validation in Korea Exchange," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2110-2120, September.
    4. Guanming He & Helen Mengbing Ren & Richard Taffler, 2021. "Do corporate insiders trade on future stock price crash risk?," Review of Quantitative Finance and Accounting, Springer, vol. 56(4), pages 1561-1591, May.
    5. Fich, Eliezer M. & Parrino, Robert & Tran, Anh L., 2023. "When and how are rule 10b5-1 plans used for insider stock sales?," Journal of Financial Economics, Elsevier, vol. 149(1), pages 1-26.
    6. Baranchuk, Nina & Rebello, Michael J., 2018. "Spillovers from good-news and other bankruptcies: Real effects and price responses," Journal of Financial Economics, Elsevier, vol. 129(2), pages 228-249.
    7. Khaled Abdou & Oscar Varela, 2009. "Is there a puzzle in the failure of venture capital backed portfolio companies?," Applied Financial Economics, Taylor & Francis Journals, vol. 19(18), pages 1439-1452.
    8. Tom Madison & Greg Roth & Andy Saporoschenko, 2004. "Bank Mergers and Insider Nontrading," The Financial Review, Eastern Finance Association, vol. 39(2), pages 203-229, May.
    9. Nadia Belkhir Boujelbene & Abdelfatteh Bouri & Jean-Luc Prigent, 2011. "Ownership structure and stock market liquidity: evidence from Tunisia," International Journal of Managerial and Financial Accounting, Inderscience Enterprises Ltd, vol. 3(1), pages 91-109.
    10. Gilstrap, Collin & Petkevich, Alex & Teterin, Pavel, 2020. "Striking up with the in crowd: When option markets and insiders agree," Journal of Banking & Finance, Elsevier, vol. 120(C).
    11. repec:hur:ijaraf:v:4:y:2014:i:2:p:62-75 is not listed on IDEAS
    12. Jasmine Yur‐Austin, 1998. "Can insiders bail themselves out before private renegotiation?," Review of Financial Economics, John Wiley & Sons, vol. 7(2), pages 197-211.
    13. Guanming He, 2023. "How do insider trading incentives shape nonfinancial disclosures? Evidence from product and business expansion disclosures," Review of Quantitative Finance and Accounting, Springer, vol. 60(1), pages 147-194, January.
    14. Burns, Natasha & Kedia, Simi, 2008. "Executive option exercises and financial misreporting," Journal of Banking & Finance, Elsevier, vol. 32(5), pages 845-857, May.
    15. Dagmar Linnertová & Oleg Deev, 2015. "Insider Trading Activities and Returns of German Blue Chips," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 63(6), pages 1995-2003.
    16. Iqbal, Zahid & Shetty, Shekar, 2002. "Insider trading and stock market perception of bankruptcy," Journal of Economics and Business, Elsevier, vol. 54(5), pages 525-535.
    17. Jonathan Stanley & F. Todd De Zoort & Gary Taylor, 2009. "The association between insider trading surrounding going concern audit opinions and future bankruptcy," Managerial Auditing Journal, Emerald Group Publishing, vol. 24(3), pages 290-312, March.
    18. Laurel Franzen & Xu Li & Oktay Urcan & Mark E. Vargus, 2014. "The Market Response To Insider Sales Of Restricted Stock Versus Unrestricted Stock," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 37(1), pages 99-118, February.
    19. Batten, Jonathan A. & Lončarski, Igor & Szilagyi, Peter G., 2021. "Strategic insider trading in foreign exchange markets," Journal of Corporate Finance, Elsevier, vol. 69(C).
    20. Yur-Austin, Jasmine, 1998. "Can insiders bail themselves out before private renegotiation?," Review of Financial Economics, Elsevier, vol. 7(2), pages 197-211.

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