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Information leakage in family firms: Evidence from short selling around insider sales

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  • Sun, Hanwen
  • Yin, Shuxing

Abstract

Using a novel insider trading and short selling dataset from the Hong Kong Stock Exchange (HKEx), we investigate potential information leakage from corporate insiders to short sellers, particularly in family firms. Even without the presence of market makers in the HKEx, we document a significant increase in short selling volume before insider trades are released to the public. The non-monotonic relationship between the short selling intensity and family control contributes to the debate on whether family presence facilitates or limits information leakage. In addition, trading by non-family insiders is more likely to convey private information, as compared to family insiders.

Suggested Citation

  • Sun, Hanwen & Yin, Shuxing, 2017. "Information leakage in family firms: Evidence from short selling around insider sales," Journal of Corporate Finance, Elsevier, vol. 47(C), pages 72-87.
    • Handle: RePEc:eee:corfin:v:47:y:2017:i:c:p:72-87
    DOI: 10.1016/j.jcorpfin.2017.09.005
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    2. Hanqing “Chevy” Fang & Kulraj Singh & Taewoo Kim & Laura Marler & James J. Chrisman, 2022. "Family business research in Asia: review and future directions," Asia Pacific Journal of Management, Springer, vol. 39(4), pages 1215-1256, December.
    3. Han-ching Huang & Yong-chern Su & Hsin-Pei Tu, 2018. "Illiquid Trades on Investment Banks in Financial Crisis," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 8(5), pages 1-5.
    4. Emily Diana & Michael Kearns & Seth Neel & Aaron Roth, 2019. "Optimal, Truthful, and Private Securities Lending," Papers 1912.06202, arXiv.org.
    5. Ye, Dezhu & Deng, Jie & Liu, Yi & Szewczyk, Samuel H. & Chen, Xiao, 2019. "Does board gender diversity increase dividend payouts? Analysis of global evidence," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 1-26.
    6. Gu, Dingwei & Liu, Xin & Sun, Hanwen & Zhao, Huainan, 2021. "Strategic insider trading: Disguising order flows to escape trading competition," Journal of Corporate Finance, Elsevier, vol. 67(C).

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    More about this item

    Keywords

    Information leakage; Insider trading; Short selling; Family firms;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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