To provide further evidence on the merits of securities class actions, we examine insider transactions immediately before and during the class period, using a larger and newer data set. We show that insiders reduce their stock sales by an abnormal amount immediately before the class period. Alternative measures of insider transactions and analysis of data before the enactment of the Private Securities Litigation Reform Act of 1995 provide consistent results. These new findings indicate that class actions, on average, have merit. Our data also reestablish a previous empirical result that there is no abnormal selling during the class period. 2007 The Southern Finance Association and the Southwestern Finance Association.
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Article provided by Southern Finance Association and Southwestern Finance Association in its journal Journal of Financial Research.