Insider Transactions Research Articles

Secure Electronic Health Records Against Insider Attacks Using Blockchain

Patient health information is provided by Electronic Health Record (EHR) systems. The security, integrity, and management of electronic health records are critical issues. EHRs facilitate online data storage and lessen human labour by making data maintenance simple. Traditional EHRs are currently vulnerable to a variety of assaults, such as internet and insider transactions. Diverse fraudulent schemes attempt to manipulate data in order to profit from it globally. Usually, this entails manipulating or hacking the data to produce fictitious reports. This is primarily due to the fact that patients are unable to follow their records. Here, a unique framework utilising the blockchain concept in the healthcare industry has been introduced. Implementing Block Chain for electronic health records (EHR) is the main objective of this proposed study. The decentralised nature of Block Chain lessens the possibility of a single point of failure, resulting in a robust system. Together with addressing the extensibility issue that Block Chain shares, the proposed approach makes use of an off-chain data source. The findings show that, as compared to the conventional health record system, computers is far more safe and scam-free. Lastly, the suggested method offers situations, like in EHR, where the given method ought to work well.

Insider trading and climate disasters

Climate disasters are increasing in frequency and severity. While a large body of research has shown that extreme climate affects various economic decisions, how climate events influence investment decisions remains largely under-investigated. This paper examines whether, and to what extent, climate disasters influence insider transactions, which are important investment decisions that attract increasing attention from both corporate management and policymakers. We find that the monthly value of insider trades increases markedly in firms headquartered in counties with a climate disaster. Climate-induced insider trading holds in general but is stronger when investors are distracted and less prevalent when insiders face higher litigation risk. Climate disasters trigger uncertainty about short-term firm fundamentals, and insiders benefit by selling prior to this being priced. Insiders living in disaster counties do not trade more than those in unaffected counties, which does not support a personal liquidity motivation. Our paper documents a new way through which climate impacts investor behavior and financial markets.

Motion Sickness: Holding the Acupressure Point of Village-Owned Business Entities on the Wheel of “Good Corporate Governance”

The transcription of Good Corporate Governance (GCG) scenarios in various state regulations basically attempts to build plots to move various economic resources from an area with low productivity to an area with higher productivity with greater results. However, this condition is different when the Indonesian Government wants Village-Owned Enterprises (BUMDes) which normatively and culturally are not designed for entrepreneurship like BUMD/BUMN. The consequence of this desire is that in its implementation BUMDes tends to be neglected and not bound by the principles of Good Corporate Governance (GCG). Through juridical-normative research methods and 3 (three) legal approaches, this research focuses on "Motion Sickness" towards BUMDes resulting from their placement in the "return on investment" space without Good Corporate Governance (GCG). The results of this research show that when analogous to a vehicle, BUMDes experience Motion Sickness or nausea due to: First, the psychological burden on the apparatus in the Village Government; Second, the Good Corporate Governance (GCG) Design is not in accordance with the BUMDes Design. Hence, the acupressure points that need to be pressed in dealing with BUMDes problems include: legal revitalization in the Village Law, overcoming work culture (such as fraud and insider transactions), sterilization of political elements (separating the interests of village officials from interests of Business Entities), and expansion of the business environment. So that in the future Corporate Governance and Corporate Management in BUMDes can be realized through the commitment of stakeholders such as: Capital Owners/GMS, Board of Supervisory/Commissioners, and Board of Directors.

Financial mechanism in the system of countering unfair practices in the securities market

The subject of this study is the system of countering insider transactions and manipulation in the securities market in terms of its mechanisms. The purpose of this work is to determine the place of the financial mechanism of counteraction and its role in the system of combating unfair practices. The securities market is the most important element ensuring the development of the economy. Today, one of the main problems of its regulation in Russia is the search for effective mechanisms to combat illegal practices. As a result of such activities, the financial security of participants is put at risk, and confidence in the market is reduced. The issue of finding and implementing new mechanisms to improve the effectiveness of control over the activities of participants is becoming urgent. In order to increase the effectiveness of the market regulation system in terms of control over insider trading and manipulation, the author proposes the introduction of a financial mechanism to counter insider trading and manipulation in the securities market. The methods of modeling and analogy, classification, comparison, system analysis, synthesis and generalization were used in the work. A comparative analysis of counteraction systems in countries with the world's leading stock exchanges has been carried out. The results show that each of the considered systems has a financial mechanism of counteraction, expressed not only by strict fines related to the amount of damage caused, but also by additional amounts of compensation, which is absent in domestic practice. The author analyzes the existing system of regulation of the Russian securities market, identifies its components, and highlights the main disadvantages. In addition, the analysis of the system showed that such a component as a financial counteraction mechanism has not been fully formed to date. The existing measures do not ensure the effectiveness of the fight against illegal practices. The financial mechanism of counteraction in Russian practice is fragmented, and the existing fines have no economic justification and are directly related to the damage caused to the market. In addition, no other measures are provided to compensate the losses received by the participants. Thus, in this paper, the concept of a financial mechanism for countering insider and manipulative activities is proposed, and its place in the Russian securities market regulation system is determined.

ІНСАЙДЕРСЬКА ІНФОРМАЦІЯ ТА ЇЇ РОЛЬ У ЗАБЕЗПЕЧЕННІ ЕФЕКТИВНОГО ФУНКЦІОНУВАННЯ РИНКУ ІНВЕСТИЦІЙНИХ ФІНАНСОВИХ ПОСЛУГ

The evolution of the main regulatory acts of the EU, which regulate insider transactions and countering market abuse, is considered in the article. The reasons for the modernization of normative acts and their main features are highlighted. Based on the analysis of current regulations (MAR Regulation, MAD II Directive), the essence of insider information and its features are revealed. Such features are accuracy, non-publicity, relationships with issuers or financial instruments, the likelihood of a significant impact on prices after publication. The priority of economic goals over legal ones in the process of legislative regulation of combating abuse of insider information is substantiated. The economic goals of regulating abuses in the investment financial services market include creating equal conditions for all market participants, protecting investors, and ensuring effective pricing. The need to ensure equal access to information, eliminate information asymmetry between market participants, as conditions for reducing the riskiness of investors' investments and countering abuses in the market of investment financial services was emphasized. The importance of legislative protection against the abuse of insider information, which consists in establishing administrative and criminal liability, is substantiated. Significant differences in administrative and criminal liability for insider abuse in the legislation of Ukraine and the EU were revealed. The current and prospective legislative regulation of the disclosure of insider information and countering abuse in the market of investment financial services in Ukraine is considered. The limitations of the law "On Capital Markets and Organized Commodity Markets" in force since July 1, 2021 were revealed, in which Chapter XII "Combating Abuses in Capital Markets and Organized Commodity Markets" regarding the content and prohibition of the use of insider information takes into account the requirements of the MAD Directive of 2003, and not MAR Regulation. The need for a different approach to the norms and criteria for the qualification of abuses during the implementation of the MAR Regulation and the MAD II Directive into Ukrainian legislation is substantiated.

Aggregate insider trading and stock market volatility in the UK

This paper examines the relationship between aggregate insider trading (AIT) and stock market volatility using monthly data on insider transactions by UK executives in public limited companies for the period January 2002 - December 2020. More specifically, a Vector Autoregression (VAR) model is estimated, and impulse response analysis is carried out. The main finding is that higher AIT (more specifically, insider purchases) leads to a short-run increase in stock market volatility; this can be attributed to a combination of insiders manipulating the timing and content of the information they release and the revelation of new economy-wide information to the market. The UK being a well-regulated market, it is plausible that the main driver of the increase in stock market volatility should be the information effect. These results are shown to be robust to using alternative (direct) measures of AIT.

Profitability of insider trading in Turkey

This study presents the first comprehensive evidence of insider trading patterns and abnormal profits in the Turkish stock market using almost 65,000 insider transactions for the period of 2008–2019. Our findings show that insiders earn a significant 6.58% abnormal profit during the one year following insider trading. Officers, directors, and institutional investors earn even more. Both purchases and sales are profitable. Top executives, major shareholders, and institutional investors earn significant dollar profits. Additionally, uninformed investors can beat the market by mimicking the portfolios of insiders, while evidence shows that regulatory changes do not reduce insiders’ profits. Finally, this study provides important trading implications for investors and regulatory implications for policymakers everywhere.

Disaster response: The COVID-19 pandemic and insider trading around the world

This paper investigates how corporate insiders respond to the initial COVID-19 outbreaks. Using comprehensive insider transaction data from 25 countries, we document a consistent pattern of insider selling during the month after the first COVID-19 case is confirmed in a given country. Insider selling during these disease outbreaks is less pronounced in countries with higher information disclosure requirements, higher public enforcement index, a more efficient judiciary system, and stronger investor protection. Furthermore, cultural differences and the stringency levels of government responses to the COVID-19 outbreaks help moderate insider panic selling when health disasters strike. The findings suggest that a transparent, reliable business system contributes to rebuilding investor trust and corporate resilience during crises.

Probability of informed trading during the COVID-19 pandemic: the case of the Romanian stock market

Using data from the Bucharest Stock Exchange, we examine the factors influencing the probability of informed trading (PIN) during February—October 2020, a COVID-19 pandemic period. Based on an unconditional quantile regression approach, we show that PIN exhibit asymmetric dependency with liquidity and trading costs. Furthermore, building a customized database that contains all insider transactions on the Bucharest Stock Exchange, we reveal that these types of orders monotonically increase the information asymmetry from the 50th to the 90th quantile throughout the PIN distribution. Finally, we bring strong empirical evidence associating the level of information asymmetry to the level of fake news related to the COVID-19 pandemic. This novel result suggests that during episodes when the level of PIN is medium to high (between 15 and 50%), any COVID-19 related news classified as misinformation released during the lockdown period, is discouraging informed traders to place buy or sell orders conditioned by their private information.

Do insider investment horizons contain information? Evidence from Australia

We examine the information content of insiders' investment horizon using a large sample of Australian insider trades from 2002 to 2021. In contrast to the finding of Akbas et al. (2020) in the U.S. context, we find that, while Australian insiders are predictive of future abnormal returns, their trading horizon contains little relevant information. We further find that Australian insider trades are dominated by purchasing transactions, which is contrary to the U.S. insider transactions that are predominately selling transactions. Our study provides useful insights for investors who are interested in detecting insiders' information, and for policy makers who strive for setting more effective insider trading laws.

Wpływ transakcji insiderów na ceny akcji na Giełdzie Papierów Wartościowych w Warszawie w latach 2010–2020

Theoretical background : Since presenting Fama’s research on market efficiency, scientists have been investigating any anomalies that interfere with market efficiency. The use of information asymmetry by insiders is just such an anomaly. A lot of scientific papers have been written in which the impact of insider transactions on the rates of return was described. Our extensive and comprehensive work completes Polish literature in this area. Purpose of the article : The purpose of this article is to investigate the impact of disclosing information about insider deals on the movement of the share price. We examined the impact of the disclosure of information about the change in shareholding by the president of the management board, members of the management board, chairman of the supervisory board, or members of the supervisory board (collectively referred to in this work as insiders) on the price of companies listed on the Warsaw Stock Exchange (WSE). Research methods : The study was carried out using the method of event studies and statistical analysis with the use of computer programming for calculations and data analysis. The analysis covers the period of 10.5 years: from January 1, 2010 to July 16, 2020, in which we took into account ESPI announcements issued by companies from the WSE main market. During the audited period, companies listed on the WSE spent over 400,000 ESPI messages, 743 of which met the criteria for the study, and we took these into account. Main findings : The research described in this article confirms that the published announcements about the change in share ownership by insiders constitute important information for investors investing on the WSE and have a significant impact on the share price – they are price-setting.

Advance Disclosure of Insider Transactions: Empirical Evidence from the Vietnamese Stock Market

Advance Disclosure of Insider Transactions: Empirical Evidence from the Vietnamese Stock Market

Corporate legal insider trading in China: Performance and determinants

This article aims to study the performance of corporate legal insiders in the Chinese stock market from January 2014 to June 2019, in the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE). We focus on buying transactions to avoid the cases where investors are forced to close their positions. Our results first show that insider transactions are associated with significant and positive excess returns above the SSE 180 and SZSE 100 market indexes. We also simulate random investors and compare their performance with the insiders and find that random investors outperform insiders. On average, insiders do not seem to have specific market timing skills in their purchase decisions, since they are not able to beat pure random investors. We further investigate the main drivers of the performance of insiders. Our results show that (1) the market return, the Sharpe ratio, unsystematic risk and GDP are the most influential factors, (2) the explanatory of the variables’ set is larger for SZSE than for SSE, and (3) the drivers’ estimates decrease as the holding period increases.

Forensic Accounting and Fraud Reduction Strategies in Developing Economy

This paper examined forensic accounting capability and useful strategies to minimize the effects of financial crimes and other related frauds in Nigeria economy. Various points at which preventive controls can be established were identified.Data were collected from two hundred and fifty five (255) respondents in the south-west geo-political zone of Nigeria and response on capability and suitability of using forensic accounting principles and measures to prevent undue practice that often arises via financial crimes in the economy were analyzed with Analysis of Variance Method. The results showed that the estimated Z-statistic was 115.3736.The critical table value of the Z-statistic at 5% level of significance (95% confidence level) was obtained as 1.645. Since the estimated test statistic (Z-statistic) value exceeds the critical table value at 95% confidence level, the null hypothesis is rejected in favour of the alternative hypothesis. Thus, the study concludes that forensic Accounting principles is capable of eliminating all types of financial frauds in any economy. It was also empirically found that forensic accounting can be used to locate diverted funds or assets, identify misappropriated assets and identified reversible insider transactions, thus, forensic accounting is useful as effective fraud detection tool, detects suspicious fraudulent transactions and covers risk assessment processes. Based on the above the study recommends the adoption of forensic accounting principles, effective appropriation of financial resources and external auditors employment.

The readability of 10-K reports and insider trading profitability

This study links the readability of 10-K reports to insider trading profitability. Using a sample of 102,060 insider transactions in the United States between 1994 and 2016, we empirically demonstrate that less readable 10-K reports increase profitability from insider trading. Consistent with the proprietary cost argument, we also document that readability impacts on insider trading profitability are more pronounced for research and development–intensive firms, for firms facing higher product market competition and trade secrecy, and for firms with lower levels of voluntary management disclosures. Overall, this study supports the proprietary cost and strategic information asymmetry channel of readability and suggests that less readable reports lead to the exploitation of information advantages by insiders. JEL Classification: D4, G14, G34, G40

Insider Trading Profitability in Turkey

This study presents the first large-scale, comprehensive evidence on the insider trading patterns and abnormal returns in the Turkish stock market. Starting with a summary of the legislation, an event study methodology is used to compute daily abnormal returns of almost 65,000 insider transactions. Findings show that insiders earn 1.56 percent more than the market average return on the first six days following the trading day. The highest abnormal returns are earned by small firm insiders. Top executives, officers, directors, legal entities, funds, and large shareholders earn significantly higher than the market average return. Short-term and midterm abnormal profits vary with size, the value of the trade, holdings of the insider, relation of the insider with the company, number of insiders within a company, and whether the transaction is a sale or purchase.

Effect of insider trading on stock characteristics

PurposeThis paper investigates if investors consider legal insider trading data while making investment decisions. If any investment decision is based on insider transactions, then it will result in abnormal stock characteristics. The purpose of this paper is to investigate if insider trading affects stock characteristics like price, return and volume. The paper further investigates the effect on stock characteristics after the trade of different types of insiders and the relationship between abnormal return and abnormal volume.Design/methodology/approachThe study uses the event study method to measure the abnormal price, return and volume. Two-stage least square regression is used to investigate the relationship between abnormal return and abnormal volume.FindingsThe insider trades affect price, return and volume. The results are identical for both buy and sell transactions. The trades of different types of insiders have diverse effects on stock characteristics. The trades of substantial shareholders give rise to the highest abnormal price and return, whereas the promoters' trades result in the highest abnormal volume. No relationship is detected between abnormal return and volume.Originality/valueA novel method to calculate the abnormal price is proposed. The effect of trading of all types of insiders on stock characteristics is analyzed. The relationship between abnormal return and abnormal volume, after an insider trade, is investigated.

부정적 사건 전 내부자거래 행태

We investigate the insider trading behavior before the disclosure of negative events. Specifically, we examine whether insider sales increase before a negative event occurs, when they concentrate, and whether corporate governance plays an active role in monitoring insider trading.BRThe major findings of the study are as follows.BRFirst, the stock prices of firms with negative events decline about 10 months before the negative events. Insider trades by executives and largest shareholders show significant net selling behavior at least 24 months before the negative events. It is interpreted that insiders with private information about firm’s future negative events sell stock in advance to avoid losses. Second, foreign investors or institutional investors do not play a significant role in monitoring opportunistic insider trading before negative events such as accounting fraud detection and administrative issues designation. Third, insider sales of ‘10% or more major shareholders’ occurred much later than those of ‘executives and largest shareholders’. It could be due to the different ability of the insider to access the inside information of the firm.BRThis study extends the scope of related research by analyzing the insider transactions that occur before negative events such as detection of fraud or administrative issues designation in Korea. In addition, the results of this study show that insider trading occurs two years before the negative event, which provides useful insights for the regulatory authorities in charge of preventing unfair insider trading in the capital market.

The Deterrent Effect of Whistleblowing on Insider Trading

An objective of the Dodd-Frank Act was to improve the detection of financial fraud, including insider trading, through the creation of the whistleblower bounty program at the SEC. This program provides for substantial financial rewards and strong anti-retaliation provisions to protect whistleblowers. I test the effectiveness of the whistleblower program in reducing informed trading by corporate insiders. I isolate the effect of the program from that of other concurrent reforms by identifying insiders of firms that are more sensitive to whistleblowing allegations. For a sample of firms that lobbied against the whistleblower provisions of the Act, I find that the profitability of insider purchases significantly reduces post Dodd-Frank relative to that of other insiders. The reduction in abnormal profits is economically meaningful, in the range of 0.05% to 0.10% daily return. I find similar results for insiders of firms with weak internal whistleblower programs who are likely to be more sensitive to the new regulation, and for insiders of firms perceived by market participants as benefiting from the additional oversight provided by the program. I analyze whether the whistleblower program was effective in reducing informed insider sales by examining pre-earnings announcement and pre-M&A settings when insider transactions are more likely to be information-driven. I find that, post Dodd-Frank, insiders are less likely to sell before events that are perceived negatively by investors. The legal literature suggests that insider trading behavior is more difficult to expose and prove than corporate-level fraud. In contrast with the beliefs of the program critics, I find that whistleblowers are effective deterrents of insider trading, suggesting that they are a valuable resource for unravelling this hard-to-detect illegal activity.

Aggregate insider trading and future market returns in theUnited States, Europe, and Asia

AbstractUsing a well‐established methodology to measure aggregate insider trading, this exploratory study examines the relation between aggregate insider trading and future stock market returns. Analysing a unique data set of more than 1.3 million individual insider transactions in 16,893 US, European, and Asian firms between 2003 and 2017, we provide novel results for a multitude of countries. We find that the null‐hypothesis (i.e., aggregate insider trading is not related to future stock market returns and thus corporate insiders cannot forecast economy‐wide trends) cannot be unanimously rejected for all 32 countries in the sample. Aggregate insider trading in the United States, Asia, China, Hong Kong, and India is coherently positively associated with future market returns according to two aggregate insider sentiment indicators. For Switzerland, Sweden, Poland, Malaysia, Singapore, and the Philippines we further find limited evidence indicating a positive association between aggregate insider trading and future index returns. On the contrary, there is some evidence that in Germany, Austria, Ireland, and Denmark aggregate insider trading is negatively associated with future market returns. Implications and further research opportunities are discussed.