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Stealth Trading and Trade Reporting by Corporate Insiders

Author

Listed:
  • André Betzer
  • Jasmin Gider
  • Daniel Metzger
  • Erik Theissen

Abstract

Regulations in the pre-Sarbanes–Oxley era allowed corporate insiders considerable flexibility in timing their trades and engaging in stealth trading, for example, by executing several trades and reporting them jointly after the last trade. We document that even these lax reporting requirements were frequently violated and stealth trading was common. Event study abnormal returns are larger after reports of stealth trades than after reports of otherwise similar non-stealth trades. Our results imply that delayed reporting impedes the adjustment of prices to the information revealed by insider trades. They lend strong support to the more stringent reporting requirements established by the Sarbanes–Oxley Act.

Suggested Citation

  • André Betzer & Jasmin Gider & Daniel Metzger & Erik Theissen, 2015. "Stealth Trading and Trade Reporting by Corporate Insiders," Review of Finance, European Finance Association, vol. 19(2), pages 865-905.
    • Handle: RePEc:oup:revfin:v:19:y:2015:i:2:p:865-905.
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    File URL: http://hdl.handle.net/10.1093/rof/rfu007
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    Citations

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    Cited by:

    1. Cziraki, Peter & Lyandres, Evgeny & Michaely, Roni, 2021. "What do insiders know? Evidence from insider trading around share repurchases and SEOs," Journal of Corporate Finance, Elsevier, vol. 66(C).
    2. Neupane, Biwesh & Thapa, Chandra & Marshall, Andrew & Neupane, Suman, 2021. "Mimicking insider trades," Journal of Corporate Finance, Elsevier, vol. 68(C).
    3. Schuster, Philipp & Theissen, Erik & Uhrig-Homburg, Marliese, 2020. "Finanzwirtschaftliche Anwendungen der Blockchain-Technologie," CFR Working Papers 20-02, University of Cologne, Centre for Financial Research (CFR).
    4. Chang, Millicent & Watson, Iain, 2015. "Delayed disclosure of insider trades: Incentives for and indicators of future performance?," Pacific-Basin Finance Journal, Elsevier, vol. 35(PA), pages 182-197.
    5. Lin, Zhaoxin & Sapp, Travis R.A. & Ulmer, Jackie Rees & Parsa, Rahul, 2020. "Insider trading ahead of cyber breach announcements," Journal of Financial Markets, Elsevier, vol. 50(C).
    6. Philipp Schuster & Erik Theissen & Marliese Uhrig-Homburg, 2020. "Finanzwirtschaftliche Anwendungen der Blockchain-Technologie [Applications of Blockchain Technology in Finance]," Schmalenbach Journal of Business Research, Springer, vol. 72(2), pages 125-147, June.
    7. Foley, Sean & Kwan, Amy & McInish, Thomas H. & Philip, Richard, 2016. "Director discretion and insider trading profitability," Pacific-Basin Finance Journal, Elsevier, vol. 39(C), pages 28-43.
    8. Gębka, Bartosz & Korczak, Adriana & Korczak, Piotr & Traczykowski, Jędrzej, 2017. "Profitability of insider trading in Europe: A performance evaluation approach," Journal of Empirical Finance, Elsevier, vol. 44(C), pages 66-90.
    9. Foley, Sean & Kwan, Amy & McInish, Thomas H. & Philip, Richard, 2017. "Reprint of Director discretion and insider trading profitability," Pacific-Basin Finance Journal, Elsevier, vol. 45(C), pages 52-67.

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