Journal of Finance Vol. 55 No. 6 2000

Information Asymmetry, R&D, and Insider Gains

David Aboody^1,2; Baruch Lev³

¹ University of California, Los Angeles · ² University of California System · ³ New York University

Abstract

Although researchers have documented gains from insider trading, the sources of private information leading to information asymmetry and insider gains have not been comprehensively investigated. We focus on research and development (R&D)—an increasingly important yet poorly disclosed productive input—as a potential source of insider gains. Our findings, for the period from 1985 to 1997 indicate that insider gains in R&D‐intensive firms are substantially larger than insider gains in firms without R&D. Insiders also take advantage of information on planned changes in R&D budgets. R&D is thus a major contributor to information asymmetry and insider gains, raising issues concerning management compensation, incentives, and disclosure policies.

DOI

10.1111/0022-1082.00305

Volume

55

Issue

6

Pages

2747-2766

Language

en

Sources

crossref openalex bibtex:phds-export.bib

Cite

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