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Are banks opaque? Evidence from insider trading

Author

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  • Fabrizio Spargoli
  • Christian Upper

Abstract

We use trades by US corporate insiders to investigate bank opacity, both in absolute terms and relative to other firms. On average, bank insider sales do not earn an abnormal return and do not predict stock returns. By contrast, bank insider purchases do, even though less than other firms. Our within-banking sector and over-time analyses also fail to provide evidence of greater opacity of banks vis-à-vis other firms. These results challenge conventional wisdom and suggest that, to assess bank opacity, the type of benchmark (transparency vs. other firms) and transaction/information (purchase/positive vs. sale/negative) are crucial.

Suggested Citation

  • Fabrizio Spargoli & Christian Upper, 2018. "Are banks opaque? Evidence from insider trading," BIS Working Papers 697, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:697
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    References listed on IDEAS

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    Cited by:

    1. Cao, Jin & Juelsrud, Ragnar E., 2022. "Opacity and risk-taking: Evidence from Norway," Journal of Banking & Finance, Elsevier, vol. 134(C).

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    More about this item

    Keywords

    bank opacity; insider trading; financial stability;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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