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What Enhances Insider Trading Profitability?

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  • Esther Brio
  • Javier Perote

Abstract

This study analyses the factors triggering insider trading profitability. Since there is not much evidence on this topic in the continental-European context, we focus on the Spanish stock market. Our findings show that the main relevant factors (the timing ability of the insider, the transparency of the transaction and the level of free cash flow of the firm) are related to insiders’ opportunities behaviour, motivated by the lack of either managerial control within the firm or enforcement of insider trading regulation. The level of ownership concentration, the spread and the interaction between the size and the transparency of the transaction are other relevant factors, some of them tested for the first time in the insider trading literature. Copyright International Atlantic Economic Society 2007

Suggested Citation

  • Esther Brio & Javier Perote, 2007. "What Enhances Insider Trading Profitability?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 35(2), pages 173-188, June.
    • Handle: RePEc:kap:atlecj:v:35:y:2007:i:2:p:173-188
    DOI: 10.1007/s11293-006-9060-8
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    References listed on IDEAS

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    Cited by:

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    2. Jeff Madura & Thanh Ngo & Jurica Susnjara, 2014. "Information leakages and the costs of merging in Europe," Applied Financial Economics, Taylor & Francis Journals, vol. 24(8), pages 515-532, April.
    3. Van Geyt, Debby & Van Cauwenberge, Philippe & Vander Bauwhede, Heidi, 2014. "Does high-quality corporate communication reduce insider trading profitability?," International Review of Law and Economics, Elsevier, vol. 37(C), pages 1-14.

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    More about this item

    Keywords

    insider trading profitability; nominee holdings; ownership concentration; signalling; spread; G14;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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