Informed Options Trading Prior to Bankruptcy Filings | Zendy

Li Ge | Zendy; Jianfeng Hu | Zendy; Mark HumpheryJenner | Zendy; TseChun Lin | Zendy

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Informed Options Trading Prior to Bankruptcy Filings

Author(s) -

Li Ge,

Jianfeng Hu,

Mark HumpheryJenner,

TseChun Lin

Publication year - 2013

Publication title -

ssrn electronic journal

Language(s) - English

Resource type - Journals

ISSN - 1556-5068

DOI - 10.2139/ssrn.2302888

Subject(s) - bankruptcy , business , actuarial science , financial economics , accounting , finance , economics

Prior evidence on pre-bankruptcy-filing informed trade is mixed. The inconclusive findings might result from the sole focus on stock trading. We reassess the presence of pre-filing informed and insider trades by examining the information content of options trading before bankruptcy announcements. We find that bankruptcy filing returns are not significantly related to pre-filing insider stock trading. However, filing returns are significantly negatively related to pre-filing insider and informed options trading. The informational content of options trading reduces with options illiquidity and the amount of information impounded into pre-filing stock prices.

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