Geographic connections to China and insider trading at the start of the COVID-19 pandemic

• 成果类型: Article
• 署名作者: Henry, Erin; Plesko, George A.; Rawson, Caleb
• 署名单位: University of Arkansas System; University of Arkansas Fayetteville; University of Connecticut
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-022-09715-y
• 发表日期: 2024
• 页码: 354-387
• 关键词: information-content; Rule 10b5-1; earnings; incentives

摘要

The sudden and exogenous nature of the COVID-19 crash provides a unique identification opportunity to study insiders' informational advantages. We find that the sales of insiders at firms with connections to China were significantly more profitable during the COVID-19 crisis than the sales of insiders at firms without connections to China. Consistent with greater attentiveness to public information about the COVID-19 pandemic, this result is driven by China connected insiders executing larger (smaller) sales in the early (late) COVID-19 period than non-China connected insiders. We find our results are driven by trades that are not preplanned under Rule 10b5-1 and are consistent with anticipation of the systematic market effects of COVID-19 on an insider's firm as opposed to firm-specific effects. Aggregate China connected insider trades also predict market returns during the COVID-19 period. Our study contributes to the insider trading literature by introducing geographic connection to market-wide information as a source of public information advantage and to regulatory efforts to investigate and understand corporate insider behavior related to the COVID-19 pandemic.