Do an insider's wealth and income matter in the decision to engage in insider trading?

• 成果类型: Article
• 署名作者: Kallunki, Jenni; Kallunki, Juha-Pekka; Nilsson, Henrik; Puhakka, Mikko
• 署名单位: University of Oulu; Aalto University; Stockholm School of Economics
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2018.06.005
• 发表日期: 2018
• 页码: 135-165
• 关键词: Insider trading; WEALTH; income

摘要

We explore why insiders engage in informed trading, given the surprisingly small average insider returns reported in the literature and the potential costs involved. We begin by proposing a model of an insider's decision to engage in insider trading. We then empirically test the model's predictions using archival data of corporate insiders in Sweden. Consistent with the model, we find that less wealthy insiders are more likely to time their insider selling, and to sell in greater magnitudes, prior to abnormal price declines than wealthy insiders. We also find that less wealthy insiders with lower risk aversion as measured by their criminal behavior are particularly prone to timing their selling to avoid price declines. (C) 2018 Elsevier B.V. All rights reserved.