Abstract
AbstractWe study the patterns of insider trading surrounding pension freezes, a widespread corporate event that creates firm value and generates positive abnormal returns. We find that insiders—particularly nonsenior executive insiders (rather than senior executive insiders) and opportunistic traders (rather than routine traders)—effectively increase their net purchases by reducing their sales of company stocks 1 year before pension freezes. Such passive insider trading does not appear to be driven by liquidity needs or portfolio choices. Overall, our findings highlight the heterogeneity of insiders and limitation of existing insider trading regulations, calling for policy makers’ attention to this insider behavior.
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