Evidence on Quasi-Private Information and Insider Trading

Abstract

We investigate the informational content of corporate insider buying activity and argue that the market impact of insiders' transactions varies based on the length of interval between the insider buying activity and the disclosure of information to the public. Based on a sample obtained from the Washington Service Insider Trade database, we find that (i) the informational content of insider transactions leaks out prior to the SEC announcement, (ii) information leakage is positively associated with the length of the interval between the insider buying activity and the SEC announcement, (iii) information leakage is only marginally different between CEOs and other officers, and (iv) those insiders with the longest delay in reporting have the greatest total impact on stock prices. The findings suggest that insiders are able to manipulate the impact of their buying activity on stock prices with their disclosure timing.