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The Reaction of Investors and Stock Prices to Insider Trading
Author(s) -
CORNELL BRADFORD,
SIRRI ERIK R.
Publication year - 1992
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1992.tb04004.x
Subject(s) - insider trading , market liquidity , insider , business , stock (firearms) , financial economics , stock price , economics , monetary economics , finance , law , mechanical engineering , paleontology , series (stratigraphy) , political science , biology , engineering
Trading by corporate insiders and their tippees is analyzed in Anheuser‐Busch's 1982 tender offer for Campbell Taggart. Court records that identify insider transactions are used to disentangle the individual insider trades from liquidity trades. Consistent with previous studies, insider trading was found to have had a significant impact on the price' of Campbell Taggart. However, the impact of informed trading on the market is complicated. Trading volume net of insider purchases rose. Contrary to the broad implications of adverse selection models, Campbell Taggart's liquidity improved when the insiders were active in the market, and the insiders received superior execution for their orders.