Review of Financial Studies Vol. 20 No. 6 2007
Insider Trades and Private Information: The Special Case of Delayed-Disclosure Trades
Abstract
In certain circumstances, insider trades such as private transactions between executives and their firms could be disclosed after the end of the firm's fiscal year, on a Form-5 filing. We find that insider sales disclosed in such a delayed manner for large firms are predictive of negative future returns (−6 to −8 percent), as well as lower future annual earnings relative to analyst forecasts. These results stand in contrast to existing findings on the uninformativeness of quickly disclosed open-market insider sales. The Sarbanes-Oxley Act curtailed the use of Form 5 under the presumption that managers used this vehicle opportunistically. Our systematic evidence supports this presumption.
- DOI
- 10.1093/rfs/hhm029
- Volume
- 20
- Issue
- 6
- Pages
- 1833-1864
- Language
- en
- Sources
- openalex crossref