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Further Evidence On Insider Trading And The Merits Of Securities Class Actions

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  • Zahid Iqbal
  • Shekar Shetty
  • Kun Wang

Abstract

To provide further evidence on the merits of securities class actions, we examine insider transactions immediately before and during the class period, using a larger and newer data set. We show that insiders reduce their stock sales by an abnormal amount immediately before the class period. Alternative measures of insider transactions and analysis of data before the enactment of the Private Securities Litigation Reform Act of 1995 provide consistent results. These new findings indicate that class actions, on average, have merit. Our data also reestablish a previous empirical result that there is no abnormal selling during the class period.

Suggested Citation

  • Zahid Iqbal & Shekar Shetty & Kun Wang, 2007. "Further Evidence On Insider Trading And The Merits Of Securities Class Actions," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 30(4), pages 533-545, December.
    • Handle: RePEc:bla:jfnres:v:30:y:2007:i:4:p:533-545
    DOI: 10.1111/j.1475-6803.2007.00227.x
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    Cited by:

    1. Katsiaryna Salavei Bardos & Joseph Golec & John P. Harding, 2013. "Litigation Risk And Market Reaction To Restatements," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 36(1), pages 19-42, January.
    2. Bradley, Daniel & Cline, Brandon N. & Lian, Qin, 2014. "Class action lawsuits and executive stock option exercise," Journal of Corporate Finance, Elsevier, vol. 27(C), pages 157-172.
    3. Blau, Benjamin M. & Tew, Philip L., 2014. "Short sales and class-action lawsuits," Journal of Financial Markets, Elsevier, vol. 20(C), pages 79-100.
    4. Pham, Mia Hang, 2020. "In law we trust: Lawyer CEOs and stock liquidity," Journal of Financial Markets, Elsevier, vol. 50(C).
    5. Laure de Batz & Evžen Kočenda, 2024. "Financial crime and punishment: A meta‐analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 38(4), pages 1338-1398, September.

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