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Full-Text Articles in Business
Does Social Capital Mitigate Managerial Self-Dealing? Evidence From Insider Trading, Kiat Bee Jimmy Lee, Jimmy Lee, Sang Hyun Park
Does Social Capital Mitigate Managerial Self-Dealing? Evidence From Insider Trading, Kiat Bee Jimmy Lee, Jimmy Lee, Sang Hyun Park
Research Collection School Of Accountancy
In this study, we examine whether the social capital surrounding the firm’s corporate headquarters mitigates managerial self-dealing in the form of opportunistic insider trading. We find strong evidence that the level of social capital in the region surrounding the firm’s headquarters is negatively and significantly associated with insider trading profitability. We also find that the negative association between social capital and insider trading profitability is more pronounced when governance is weaker and corporate opacity is higher, instances where insiders have greater opportunities to trade on their private information. Further analyses on the potential mechanisms suggest that the negative association is …
Short Sellers And Insider Trading Profitability: A Natural Experiment, Xia Chen, Qiang Cheng, Ting Luo, Heng Yue
Short Sellers And Insider Trading Profitability: A Natural Experiment, Xia Chen, Qiang Cheng, Ting Luo, Heng Yue
Research Collection School Of Accountancy
We examine the impact of short sellers on insider trading profitability using a natural experiment of a pilot program which relaxed short-selling constraints for randomly selected pilot stocks. We find that pilot firms experienced a significant decrease in insider trading profitability during the pilot program. The results are more pronounced for the pilot firms with poor information quality, and for the pilot firms without corporate restrictions on insider trading. Our evidence suggests that short sellers serve an important market disciplinary role by reducing insider trading profitability.
Insider Sales Under The Threat Of Short Sellers: New Hypothesis And New Tests, Kemin Wang, Rencheng Wang, K. C. John Wei, Bohui Zhang, Yi Zhou
Insider Sales Under The Threat Of Short Sellers: New Hypothesis And New Tests, Kemin Wang, Rencheng Wang, K. C. John Wei, Bohui Zhang, Yi Zhou
Research Collection School Of Accountancy
Using the Regulation SHO program as a quasi-experiment, we document that the threat of short selling has a negative effect on the volume of opportunistic insider selling and a positive effect on its profitability for each transaction. These effects are stronger among firms with higher litigation risk, greater media coverage, and executives who have more of their firms' stock-related holdings. We further find robust evidence when we extend the analyses to short selling deregulations in the Chinese and Hong Kong stock exchanges. Overall, our findings suggest that short sellers play a disciplinary role in opportunistic insider selling.
Corporate Tax Aggressiveness And Insider Trading, Sung Gon Chung, Beng Wee Goh, Kiat Bee Jimmy Lee, Terry Shevlin
Corporate Tax Aggressiveness And Insider Trading, Sung Gon Chung, Beng Wee Goh, Kiat Bee Jimmy Lee, Terry Shevlin
Research Collection School Of Accountancy
We examine the association between corporate tax aggressiveness and theprofitability of insider trading under the assumption that insider tradingprofits reflect managerial opportunism. We document that insider purchaseprofitability, but not sales profitability, is significantly higher on average inmore tax aggressive firms. We also find that the positive association between taxaggressiveness and insider purchase profitability is attenuated for firms withmore effective monitoring and is accentuated for firms with a more opaqueinformation environment.In addition, we provide empirical evidence that tax aggressiveness issignificantly associated with greater insider sales volume in the fiscal yearprior to a stock price crash. Finally, we find that the association …
Corporate Tax Aggressiveness And Managerial Rent Extraction: Evidence From Insider Trading, Sung Gon Chung, Beng Wee Goh, Kiat Bee Jimmy Lee, Terry J. Shevlin
Corporate Tax Aggressiveness And Managerial Rent Extraction: Evidence From Insider Trading, Sung Gon Chung, Beng Wee Goh, Kiat Bee Jimmy Lee, Terry J. Shevlin
Research Collection School Of Accountancy
Recent studies argue that aggressive forms of tax avoidance can be used to facilitate managerial rent extraction from shareholders (e.g., Desai 2004; Desai and Dharmapala 2006; Desai et al. 2007). Despite this agency view of tax avoidance receiving increasing attention in the literature, there is limited empirical evidence that managers actually extract rents generated from tax avoidance activities. In this paper, we examine the association between corporate tax aggressiveness and managerial rent extraction in the form of insider trading profitability. We document that, on average, insider purchase profitability, but not sale profitability, is significantly higher in more tax aggressive firms. …
Rational Information Leakage, Hai Lu, Raffi Indjejikian, Liyan Yang
Rational Information Leakage, Hai Lu, Raffi Indjejikian, Liyan Yang
Research Collection School Of Accountancy
Empirical evidence suggests that information leakage in capital markets is common. We present a trading model to study the incentives of an informed trader (e.g., a well informed insider) to voluntarily leak information about an asset's value to one or more independent traders. Our model shows that, while leaking information dissipates the insider's information advantage about the asset's value, it enhances his information advantage about the asset's execution price relative to other informed traders. The profit impact of these two effects are countervailing. When there are a sufficient number of other informed traders, the profit impact from enhanced information dominates. …
Managerial Incentives And Management Forecast Precision, Qiang Cheng, Ting Luo, Heng Yue
Managerial Incentives And Management Forecast Precision, Qiang Cheng, Ting Luo, Heng Yue
Research Collection School Of Accountancy
Managers have great discretion in determining forecast characteristics, butlittle is known about how managerial incentives affect these characteristics. This paperexamines whether managers strategically choose forecast precision for self-servingpurposes. Building on the prior finding that the market reaction to vague forecasts isweaker than its reaction to precise forecasts, we find that for management forecastsdisclosed before insider sales, more positive (negative) news forecasts are more (less)precise than other management forecasts. The opposite applies to managementforecasts disclosed before insider purchases. These results are consistent withmanagers strategically choosing forecast precision to increase stock prices beforeinsider sales and to decrease stock prices before insider purchases. …
Managerial Incentives And Management Forecast Precision, Qiang Cheng, Ting Luo, Heng Yue
Managerial Incentives And Management Forecast Precision, Qiang Cheng, Ting Luo, Heng Yue
Research Collection School Of Accountancy
Managers have great discretion in determining forecast characteristics, but little is known about how managerial incentives affect these characteristics. This paper examines whether managers strategically choose forecast precision for self-serving purposes. Building on the prior finding that the market reaction to vague forecasts is weaker than its reaction to precise forecasts, we find that for management forecasts disclosed before insider sales, more positive (negative) news forecasts are more (less) precise than other management forecasts. The opposite applies to management forecasts disclosed before insider purchases. These results are consistent with managers strategically choosing forecast precision to increase stock prices before insider …
Managerial Incentives And Management Forecast Precision, Qiang Cheng, Ting Luo, Heng Yue
Managerial Incentives And Management Forecast Precision, Qiang Cheng, Ting Luo, Heng Yue
Research Collection School Of Accountancy
Managers have great discretion in determining management forecast characteristics, but little is known about how managerial incentives affect these characteristics. In this paper, we examine whether managers strategically choose the precision of their earnings forecasts for self-serving purposes. Building on prior research demonstrating that the market reaction to vague management forecasts is weaker than its reaction to precise forecasts, we find that for management forecasts disclosed before insider sales, more positive (negative) news forecasts are more (less) precise than other management forecasts. The opposite applies to management forecasts disclosed before insider purchases. These results are consistent with managers strategically choosing …