Uncertain times and the insider perspective
Uncertain times and the insider perspective
This paper examines insiders' informational privilege by studying the nexus between aggregated self-reported insider trades and Economic Policy Uncertainty (EPU). We demonstrate that firm insiders act in response to the first signs of uncertainty as it appears in the media, and high-ranked managers, such as CEOs and CFOs, react more promptly than other insiders. Our findings further support the idea that insiders' indirect informational advantages allow them to interpret the significance of public information for cash flows more accurately in their own companies. Our study is the first to examine insiders' behavior using pure public information; it is also the first to exclude the influence of private information completely. We also consider various measures of EPU, including global and categorical indices representing economic, political uncertainty, while taking the financial crisis period into account.
Economic policy uncertainty, Informational privilege, Insider trading, Public information
Lambe, Brendan
7ffba95c-5758-4233-af25-2cd482f25606
Li, Zhiyong
02304a0a-5c4a-4b70-ac58-51df12b8f0f8
Qin, Weiping
3e8d75f0-72bb-4ac5-8301-51633cc0eb16
1 May 2022
Lambe, Brendan
7ffba95c-5758-4233-af25-2cd482f25606
Li, Zhiyong
02304a0a-5c4a-4b70-ac58-51df12b8f0f8
Qin, Weiping
3e8d75f0-72bb-4ac5-8301-51633cc0eb16
Lambe, Brendan, Li, Zhiyong and Qin, Weiping
(2022)
Uncertain times and the insider perspective.
International Review of Financial Analysis, 81, [102138].
(doi:10.1016/j.irfa.2022.102138).
Abstract
This paper examines insiders' informational privilege by studying the nexus between aggregated self-reported insider trades and Economic Policy Uncertainty (EPU). We demonstrate that firm insiders act in response to the first signs of uncertainty as it appears in the media, and high-ranked managers, such as CEOs and CFOs, react more promptly than other insiders. Our findings further support the idea that insiders' indirect informational advantages allow them to interpret the significance of public information for cash flows more accurately in their own companies. Our study is the first to examine insiders' behavior using pure public information; it is also the first to exclude the influence of private information completely. We also consider various measures of EPU, including global and categorical indices representing economic, political uncertainty, while taking the financial crisis period into account.
Text
Qin_2022_IRFA
- Accepted Manuscript
More information
Accepted/In Press date: 1 April 2022
e-pub ahead of print date: 4 April 2022
Published date: 1 May 2022
Additional Information:
Publisher Copyright:
© 2022 Elsevier Inc.
Keywords:
Economic policy uncertainty, Informational privilege, Insider trading, Public information
Identifiers
Local EPrints ID: 472594
URI: http://eprints.soton.ac.uk/id/eprint/472594
ISSN: 1057-5219
PURE UUID: 41db3743-96f6-4f63-835e-9ec6b42880f5
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Date deposited: 09 Dec 2022 17:38
Last modified: 10 Apr 2024 04:02
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Contributors
Author:
Brendan Lambe
Author:
Zhiyong Li
Author:
Weiping Qin
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