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Does director trading change the information environment?

Author

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  • Millicent Chang

    (The University of Western Australia, Australia)

  • Xiaolin Qian

    (University of Macau, China)

  • Jing Yu
  • Yvonne See

Abstract

Investigating ASX300 firms for the period 2002–2010, we find that the information content of director trading has a negative relationship with post-trade information asymmetry, but a positive relationship with information efficiency. These results are mainly driven by director purchases rather than their sales, and are stronger in non-executive director trading. Our results are robust to the adoption of IFRS in 2005 and the global financial crisis in 2008. These findings back the claims of insider trading proponents, by showing that director trading plays a crucial role in reducing information asymmetry and in improving information efficiency for stock market participants.

Suggested Citation

  • Millicent Chang & Xiaolin Qian & Jing Yu & Yvonne See, 2017. "Does director trading change the information environment?," Australian Journal of Management, Australian School of Business, vol. 42(2), pages 205-229, May.
    • Handle: RePEc:sae:ausman:v:42:y:2017:i:2:p:205-229
    DOI: 10.1177/0312896215614631
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    More about this item

    Keywords

    Director trading; information asymmetry; information environment;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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