Insider trading may convey information to the market and promote accurate
pricing of stocks. In this dissertation, I investigate insider trading at the turn of the
century.
In the first essay, I investigate insider trading activity in technology stocks during
the high price - high volatility period of the late 1990s. I document that insiders of
technology firms were heavy sellers during the ten month pre-peak period in which stock
prices more than doubled. The technology stocks that were sold by insiders more
extensively in the pre-peak period had lower returns in the post-peak period. I
furthermore investigate the relation between the net order flows (buyer initiated minus
seller initiated trades) and abnormal insider trading activity. I document that the net
order flow is positively related to abnormal insider trading activity. However, this
positive relation becomes weaker in the peak period; which implies less price discovery
through insider trading during the rise of technology stock prices.
In the second essay, I document that disclosure requirements significantly affect
insider trading behavior. The Sarbanes-Oxley Act of 2002 requires expedited and on-line disclosure of insider transactions. This increase in the visibility of insider trading reduces
informational advantage of insiders and increases the likelihood of facing legal sanctions
for insiders. I document that insider purchases significantly declined after the Sarbanes-
Oxley Act. In addition, the incidences of insider purchases (sales) prior to positive
(negative) earnings surprises declined after the Act. Finally, I document that the earnings
announcements become more informative after the Act, which is consistent with less
price discovery through insider trading prior to earnings announcements. However, the
evidence that the decline in insider trading contributes to more informative earnings
announcements is pronounced for insider purchases but not for insider sales.
Identifer | oai:union.ndltd.org:tamu.edu/oai:repository.tamu.edu:1969.1/ETD-TAMU-3171 |
Date | 15 May 2009 |
Creators | Tartaroglu, Semih -. |
Contributors | Boehmer, Ekkehart |
Source Sets | Texas A and M University |
Language | en_US |
Detected Language | English |
Type | Book, Thesis, Electronic Dissertation, text |
Format | electronic, application/pdf, born digital |
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