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Do corporate insiders trade on future stock price crash risk?
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He, Guanming, Ren, Helen Mengbing and Taffler, Richard J. (2021) Do corporate insiders trade on future stock price crash risk? Review of Quantitative Finance and Accounting, 56 . pp. 1561-1591. doi:10.1007/s11156-020-00936-3
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Official URL: https://doi.org/10.1007/s11156-020-00936-3
Abstract
We explore whether firm managers trade on future stock price crash risk. This depends on managers’ ability to assess future crash risk, and on whether the expected payoff is greater than the expected costs associated with potential reputation loss and litigation risk. We find that insider sales are positively associated with future crash risk, which is consistent with managers’ trading on crash risk for personal gain. We also find that managers take advantage of high information opacity to pursue crash-risk-based insider sales more aggressively, but are less able to capitalize on this in the case of financial constraints or post-SOX.
| Item Type: | Journal Article | ||||||||
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| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HG Finance |
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| Divisions: | Faculty of Social Sciences > Warwick Business School > Accounting Faculty of Social Sciences > Warwick Business School |
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| Library of Congress Subject Headings (LCSH): | Insider trading in securities, Disclosure of information, Financial crises, Stock price forecasting | ||||||||
| Journal or Publication Title: | Review of Quantitative Finance and Accounting | ||||||||
| Publisher: | Springer New York LLC | ||||||||
| ISSN: | 0924-865X | ||||||||
| Official Date: | May 2021 | ||||||||
| Dates: |
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| Volume: | 56 | ||||||||
| Page Range: | pp. 1561-1591 | ||||||||
| DOI: | 10.1007/s11156-020-00936-3 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Open Access | ||||||||
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