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Do corporate insiders trade on future stock price crash risk?

He, G.; Ren, H.M.; Taffler, R.

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Authors

H.M. Ren

R. Taffler



Abstract

We explore whether firm managers trade on future stock price crash risk. This depends on managers’ ability to assess future crash risk, and on whether the expected payoff is greater than the expected costs associated with potential reputation loss and litigation risk. We find that insider sales are positively associated with future crash risk, which is consistent with managers’ trading on crash risk for personal gain. We also find that managers take advantage of high information opacity to pursue crash-risk-based insider sales more aggressively, but are less able to capitalize on this in the case of financial constraints or post-SOX.

Citation

He, G., Ren, H., & Taffler, R. (2021). Do corporate insiders trade on future stock price crash risk?. Review of Quantitative Finance and Accounting, 56(4), 1561-1591. https://doi.org/10.1007/s11156-020-00936-3

Journal Article Type Article
Acceptance Date Sep 9, 2020
Online Publication Date Sep 21, 2020
Publication Date 2021-05
Deposit Date Sep 9, 2020
Publicly Available Date Feb 2, 2021
Journal Review of Quantitative Finance and Accounting
Print ISSN 0924-865X
Electronic ISSN 1573-7179
Publisher Springer
Peer Reviewed Peer Reviewed
Volume 56
Issue 4
Pages 1561-1591
DOI https://doi.org/10.1007/s11156-020-00936-3
Public URL https://durham-repository.worktribe.com/output/1256864

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http://creativecommons.org/licenses/by/4.0/

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