Abstract
In this paper, we investigate how changes in the regulatory environment have affected the volume, timing, and profitability of insider trading over the period 1986-2004. Consistent with increased regulatory scrutiny, we find that there has been a steady increase over time in the proportion of trades by insiders that occur right after quarterly earnings announcements, and that more and more firms appear to adopt policies to restrict their insider trading. Despite these changes in the timing of insider transactions, however, we find no evidence that the overall volume or informativeness of insider trading has decreased over time. The results suggest that the information advantage of insiders in general does not arise from superior knowledge of near term earnings, but instead reflects the longer term prospects of the firm.
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