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Reprint of Director discretion and insider trading profitability

Author

Listed:
  • Foley, Sean
  • Kwan, Amy
  • McInish, Thomas H.
  • Philip, Richard

Abstract

Using a machine-learning algorithm, we classify over 60,000 director transactions into discretionary and non-discretionary purchases and sales based on the trading motive provided by the insider. We find that discretionary trades by company insiders are more informed than non-discretionary trades. Further, discretionary purchases generate higher abnormal returns (1) for larger purchases, or when the purchase is for (2) the stock of a smaller firm, or (3) a firm with greater information asymmetry.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:pacfin:v:45:y:2017:i:c:p:52-67
    DOI: 10.1016/j.pacfin.2016.06.012
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    Insider trading; Director discretion;

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