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Information asymmetry and the information content of insider trades: Evidence from the Indian stock market

Author

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  • Chauhan, Yogesh
  • Kumar, K. Kiran
  • Chaturvedula, Chakrapani

Abstract

This paper investigates a proprietary dataset of insider trades for Indian listed firms, where controlling ownership and business groups dominate. We show that the information content of insider trading is an inverted U-shaped function of controlling ownership. Further, we find that the information content of insider trading is lower when firms are affiliated with a business group. We also show that information production depends on the degree of information asymmetry between insiders and outsiders. Finally, we find that insider trades that occur prior to an earnings announcement have a larger impact on stock prices.

Suggested Citation

  • Chauhan, Yogesh & Kumar, K. Kiran & Chaturvedula, Chakrapani, 2016. "Information asymmetry and the information content of insider trades: Evidence from the Indian stock market," Journal of Multinational Financial Management, Elsevier, vol. 34(C), pages 65-79.
    • Handle: RePEc:eee:mulfin:v:34:y:2016:i:c:p:65-79
    DOI: 10.1016/j.mulfin.2015.12.003
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    More about this item

    Keywords

    Insider trading; Information asymmetry; Emerging market; Information content; Controlling ownership; Business group; Market efficiency;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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