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If It's Good for the Firm, It's Good for Me: Insider Trading and Repurchases Motivated by Undervaluation
Author(s) -
Jategaonkar Shrikant P.
Publication year - 2013
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/fire.12000
Subject(s) - insider trading , insider , business , stock (firearms) , monetary economics , economics , finance , mechanical engineering , political science , law , engineering
My findings suggest that information inherent in insider trading can be used to identify undervalued repurchasing firms. I examine the relation between insider trading and the performance of open market repurchase (OMR) firms. I show that firms with high net insider buying prior to OMR announcements not only earn abnormal stock returns in both the short‐ and long‐run, but also exhibit better operating performance. Overall, the evidence is consistent with insiders timing their trades prior to OMR announcements.