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Are corporate managers savvy about their stock price? Evidence from insider trading after earnings announcements

Author

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  • Kolasinski, Adam
  • Li, Xu

Abstract

We find that insiders trade as if they exploit market underreaction to earnings news, buying (selling) after good (bad) earnings announcements when the price reaction to the announcement is low (high). We also find that insider trades attributable to public information about earnings and the price reaction generate abnormal returns. By demonstrating that managers spot market underreaction to earnings news, our results imply that managers are savvy about their company's stock price.

Suggested Citation

  • Kolasinski, Adam & Li, Xu, 2010. "Are corporate managers savvy about their stock price? Evidence from insider trading after earnings announcements," Journal of Accounting and Public Policy, Elsevier, vol. 29(1), pages 27-44, January.
    • Handle: RePEc:eee:jappol:v:29:y::i:1:p:27-44
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    Citations

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    Cited by:

    1. Paul A. Griffin & David H. Lont & Kate McClune, 2014. "Insightful Insiders? Insider Trading and Stock Return around Debt Covenant Violation Disclosures," Abacus, Accounting Foundation, University of Sydney, vol. 50(2), pages 117-145, June.
    2. Paul A. Griffin & David H. Lont & Kate McClune, 2014. "Insightful Insiders? Insider Trading and Stock Return around Debt Covenant Violation Disclosures," Abacus, Accounting Foundation, University of Sydney, vol. 50(2), pages 117-145, June.
    3. repec:grz:wpsses:2020-04 is not listed on IDEAS
    4. repec:vuw:vuwscr:19194 is not listed on IDEAS
    5. Fink, Josef, 2021. "A review of the Post-Earnings-Announcement Drift," Journal of Behavioral and Experimental Finance, Elsevier, vol. 29(C).
    6. Contreras, Harold, 2020. "Strategic timing of corporate insiders when trading at earnings announcements," Finance Research Letters, Elsevier, vol. 34(C).
    7. Contreras, Harold & Marcet, Francisco, 2021. "Sell-side analyst heterogeneity and insider trading," Journal of Corporate Finance, Elsevier, vol. 66(C).
    8. Gider, Jasmin & Westheide, Christian, 2016. "Relative idiosyncratic volatility and the timing of corporate insider trading," Journal of Corporate Finance, Elsevier, vol. 39(C), pages 312-334.
    9. Lont, David & Griffin, Paul & McClune, Kate, 2011. "Insightful Insiders? Insider Trading and Stock Return Around Debt Covenant Violation Disclosures," Working Paper Series 19194, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.

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