Details

Autor(en) / Beteiligte

• Agrawal, Anup
• Cooper, Tommy

Titel

Insider trading before accounting scandals

Ist Teil von

• Journal of corporate finance (Amsterdam, Netherlands), 2015-10, Vol.34, p.169-190

Ort / Verlag

Amsterdam: Elsevier B.V

Erscheinungsjahr

2015

Link zum Volltext

Quelle

Elsevier ScienceDirect Journals Complete

Beschreibungen/Notizen

• We examine insider trading in a sample of more than 500 firms involved in accounting scandals revealed by earnings-decreasing restatements, and in a control sample of non-restating firms. Managers who sell stock while earnings are misstated potentially commit two crimes, earnings manipulation and insider trading, and their selling increases investor scrutiny and the likelihood of the manipulation being revealed. We examine the purchases, sales and net sales of five groups of corporate insiders during the misstated period and a pre-misstated period, using a difference-in-differences approach. Using several measures of the level of insider trading, we estimate cross-sectional regressions that control for other determinants of the level of insider trading. For the full sample of restating firms, we find weak evidence that top managers of misstating firms sell more stock during the misstated period than during the pre-misstated period, relative to the control sample. But in a number of subsamples where insiders had greater incentives to sell before the revelation of accounting problems, we find strong evidence that top managers of restating firms sell substantially more stock during the misstated period. These findings suggest that managers' desire to sell their stockholdings at inflated prices is a motive for earnings manipulation. Our finding that insiders brazenly trade on a crime for which they are potentially culpable suggests that insider trading is more widespread in the market than has been found in the prior literature. •Examine trading by registered insiders in restating firms during misstated periods•D-i-D regressions reveal no abnormal selling by insiders in less serious cases.•But large abnormal selling by top managers in more serious cases•Top managers seem to brazenly trade on a crime for which they may be culpable.•Suggests that insider trading may be more widespread than previously found