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The effect of realized future growth opportunities on insider trading

Author

Listed:
  • Zou, Gaofeng
  • Du, Shuchang
  • Yang, Yulong
  • Huang, Zuo

Abstract

This paper analyzes the effect of realized future growth opportunities on insider trading. Using intangible information decomposed by the book-to-market ratio, we find that insiders’ stock sales are significantly negatively associated with intangible information. The results suggest that intangible information provides insiders an opportunity to gain profit by means of selling stocks with high-level realized future growth opportunities in advance. Meanwhile, high information transparency of the firm will strengthen the insider’s trading based on realized future growth opportunities.

Suggested Citation

  • Zou, Gaofeng & Du, Shuchang & Yang, Yulong & Huang, Zuo, 2022. "The effect of realized future growth opportunities on insider trading," Economics Letters, Elsevier, vol. 210(C).
    • Handle: RePEc:eee:ecolet:v:210:y:2022:i:c:s0165176521004286
    DOI: 10.1016/j.econlet.2021.110154
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    References listed on IDEAS

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    5. Kallunki, Juha-Pekka & Nilsson, Henrik & Hellström, Jörgen, 2009. "Why do insiders trade? Evidence based on unique data on Swedish insiders," Journal of Accounting and Economics, Elsevier, vol. 48(1), pages 37-53, October.
    6. Alan D. Jagolinzer & David F. Larcker & Gaizka Ormazabal & Daniel J. Taylor, 2020. "Political Connections and the Informativeness of Insider Trades," Journal of Finance, American Finance Association, vol. 75(4), pages 1833-1876, August.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Insider trading; Realized future growth opportunities; Intangible information; Information transparency;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G3 - Financial Economics - - Corporate Finance and Governance

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