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Changes in earnings announcement tone and insider sales

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  • Tama-Sweet, Isho

Abstract

The evidence from prior literature suggests that insider trading is related to firms' reported financial results and disclosure choices. I contribute to the literature by examining the association between narrative disclosure in earnings announcements and insider trading. Specifically, I hypothesize and find a positive association between changes in the optimistic tone of earnings announcements and CEOs' subsequent equity sales. In addition, I hypothesize and find that this relation is mitigated by the Sarbanes–Oxley Act and litigation risk. CEOs' financial gain from selling equity after more optimistic earnings announcements is small relative to their total compensation.

Suggested Citation

  • Tama-Sweet, Isho, 2014. "Changes in earnings announcement tone and insider sales," Advances in accounting, Elsevier, vol. 30(2), pages 276-282.
    • Handle: RePEc:eee:advacc:v:30:y:2014:i:2:p:276-282
    DOI: 10.1016/j.adiac.2014.09.006
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    References listed on IDEAS

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    1. Bergstresser, Daniel & Philippon, Thomas, 2006. "CEO incentives and earnings management," Journal of Financial Economics, Elsevier, vol. 80(3), pages 511-529, June.
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    Cited by:

    1. Kate Suslava, 2021. "“Stiff Business Headwinds and Uncharted Economic Waters”: The Use of Euphemisms in Earnings Conference Calls," Management Science, INFORMS, vol. 67(11), pages 7184-7213, November.
    2. D. G. DeBoskey & Yan Luo & Linying Zhou, 2019. "CEO power, board oversight, and earnings announcement tone," Review of Quantitative Finance and Accounting, Springer, vol. 52(2), pages 657-680, February.
    3. Cheng, Lin & Jin, Qinglu & Ma, Hui, 2023. "Tone emphasis and insider trading," Journal of Corporate Finance, Elsevier, vol. 80(C).
    4. Warwick Anderson & Wen Kang, 2018. "The Relative Announcement Effects of Ordinary Dividends, Special Dividends and Share Buybacks in New Zealand," Working Papers in Economics 18/02, University of Canterbury, Department of Economics and Finance.
    5. Dongwook Kim & Sungbum Kim, 2017. "The Role of Mobile Technology in Tourism: Patents, Articles, News, and Mobile Tour App Reviews," Sustainability, MDPI, vol. 9(11), pages 1-45, November.

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