Trading Behavior of Multi-Firm Insiders
Year: 2025
Type: article
Abstract: This study considers the trading behavior of insiders affiliated with multiple firms and information contained in these transactions. We leverage a unique dataset that captures the tenure and firm affiliations of corporate insiders and examine the impact of insiders transitioning from single to multi-firm affiliations on the informativeness and outcomes of their trades. Our findings reveal that while insider transactions generally predict future returns, trades executed by multi-firm insiders, especially those involving sales in incumbent firms and purchases in new affiliations, tend to diverge from being purely information-driven. These transactions are more closely aligned with liquidity needs and portfolio rebalancing. This study extends the existing literature on the informational nature of insider trading by highlighting the unique motivations behind multi-firm insider transaction. We also demonstrate the importance of considering an insider's extent of affiliations and the specific timing of their trades to fully understand the informativeness of insider trading activities.
Source: Quarterly Journal of Finance
Authors: Chao Gao, Mitchell Johnston, Yun Qing Wan
Institutions: Australian National University, University of Dayton
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7126426841