Insider Trading Restrictions and Informed Trading in Peer Stocks-Reference-Cited by-同舟云学术

Insider Trading Restrictions and Informed Trading in Peer Stocks

Published:2024-06-05 Issue: Volume: Page:
ISSN:0025-1909
Container-title:Management Science
language:en
Short-container-title:Management Science

Author:

Deuskar Prachi¹^ORCID,Khatri Aditi²^ORCID,Sunder Jayanthi³^ORCID

Affiliation:

1. Finance Area, Indian School of Business, Hyderabad 500111, India;

2. Cornerstone Research, New York, New York 10022;

3. Dhaliwal-Reidy School of Accountancy, University of Arizona, Tucson, Arizona 85721

Abstract

Using a uniquely constructed data set of trades by corporate insiders in all stocks, we find that, after insider trading regulations become stricter, insiders are 20% more likely to trade in peer stocks and that such trades become more profitable. The increase in both the probability and profitability of peer-stock trades is driven by the insider’s information that is fungible to industry peers. Stricter insider trading laws are designed to improve liquidity and price informativeness in capital markets. We show that peer trading dampens these intended benefits of the insider trading regulation. This paper was accepted by Ranjani Krishnan, accounting. Funding: This work was supported by NSE-NYU Stern Initiative on the Study of Indian Financial Markets. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.02907 .

Publisher

Institute for Operations Research and the Management Sciences (INFORMS)

Link

https://pubsonline.informs.org/doi/pdf/10.1287/mnsc.2022.02907

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