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Insider trading and the post†earnings announcement drift

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  • Christina Dargenidou
  • Ian Tonks
  • Fanis Tsoligkas

Abstract

We show that trades by corporate insiders after an earnings announcement determine in part the extent of the post†earnings announcement drift anomaly. Contrarian trades mitigate the under†reaction to earnings announcements, and confirmatory trades allow for price discovery with price movements continuing in the same direction as the earnings surprise. These results are consistent with insider trading being a mechanism that provides relevant information on transitory or permanent changes to the earnings process, allowing the market to make appropriate inferences about the nature of the earnings surprise.

Suggested Citation

  • Christina Dargenidou & Ian Tonks & Fanis Tsoligkas, 2018. "Insider trading and the post†earnings announcement drift," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 45(3-4), pages 482-508, March.
    • Handle: RePEc:bla:jbfnac:v:45:y:2018:i:3-4:p:482-508
    DOI: 10.1111/jbfa.12305
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    1. repec:grz:wpsses:2020-04 is not listed on IDEAS
    2. Waleed Khalid & Kashif Ur Rehman & Muhammad Kashif, 2019. "The Impact of Merger and Acquisition Firms on Stock Market Bubble," Global Regional Review, Humanity Only, vol. 4(1), pages 335-342, March.
    3. Zhang, Sijia & Gregoriou, Andros, 2020. "Post earnings announcement drift, liquidity and zero leverage firms: Evidence from the UK stock market," Journal of Business Research, Elsevier, vol. 116(C), pages 13-26.
    4. Fink, Josef, 2021. "A review of the Post-Earnings-Announcement Drift," Journal of Behavioral and Experimental Finance, Elsevier, vol. 29(C).
    5. Ho, Tuan Q. & Nguyen, Y. & Tran, Hieu, 2024. "The impact of insider ownership and institutional ownership on post-earnings-announcement-drift: Evidence from Vietnam," Research in International Business and Finance, Elsevier, vol. 70(PB).
    6. Zhang, Sijia & Gregoriou, Andros & Wu, He, 2024. "Asymmetric post earnings announcement drift and order flow imbalance: The impact on stock market returns," International Review of Financial Analysis, Elsevier, vol. 94(C).
    7. Tsalavoutas, Ioannis & Tsoligkas, Fanis, 2021. "Uncertainty avoidance and stock price informativeness of future earnings," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).
    8. Contreras, Harold, 2020. "Strategic timing of corporate insiders when trading at earnings announcements," Finance Research Letters, Elsevier, vol. 34(C).
    9. Contreras, Harold & Marcet, Francisco, 2021. "Sell-side analyst heterogeneity and insider trading," Journal of Corporate Finance, Elsevier, vol. 66(C).

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