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Anchoring-induced insider sales in emerging markets: The role of stock price informativeness

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  • Lin, Wenlian
  • Pan, Jingchen

Abstract

Using insider sales data from China's A-share market during 2010–2023, we find that insiders exhibit significant anchoring biases. Insider sales rise when stock prices approach their 52-week high while such trades yield lower profits than those made farther from this point. Anchoring-induced insider sales are more pronounced in stocks with low price informativeness where insiders find it difficult to assess whether their private information has been fully incorporated into stock prices. This behavior is attenuated following earnings announcements, and is also reduced by China's capital market liberalization reforms that enhance stock price informativeness. It is stronger among non-core insiders, who rely more on market signals to evaluate their private information. Beyond selling, the 52-week high also affects insider buying. In addition to the stock-level anchor, the market's 52-week high acts as an anchor in insider selling. Anchoring-induced sales are more pronounced among male insiders but are not significant among insiders with a financial background. Our findings highlight the role of anchoring bias in insider trading and the potential of capital market reforms to curb such behavioral distortions.

Suggested Citation

  • Lin, Wenlian & Pan, Jingchen, 2026. "Anchoring-induced insider sales in emerging markets: The role of stock price informativeness," Pacific-Basin Finance Journal, Elsevier, vol. 96(C).
    • Handle: RePEc:eee:pacfin:v:96:y:2026:i:c:s0927538x25003907
    DOI: 10.1016/j.pacfin.2025.103053
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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • 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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