Strategic silence, insider selling and litigation risk

• 成果类型: Article
• 署名作者: Billings, Mary Brooke; Cedergren, Matthew C.
• 署名单位: New York University
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2014.12.001
• 发表日期: 2015
• 关键词: securities litigation; merits matter; REFORM ACT; voluntary disclosures; earnings guidance; INFORMATION; announcements; CONSEQUENCES; turnover

摘要

Prior work finds that managers beneficially time their purchases, but not sales, prior to forecasts. Focusing on if (as opposed to when) a forecast is given, we link insider selling to silence in advance of earnings disappointments. This raises the question of whether the absence of incriminating trading drives reductions in litigation risk potentially attributed to warnings. We find that the absence of a warning combined with the presence of selling exacerbates the consequences associated with the individual behaviors. Yet, selling prior to a warning typically does not offset all of the warning's benefit. In so doing, we supply the first robust evidence of a litigation benefit associated with warning. (C) 2014 Elsevier B.V. All rights reserved.