TY - JOUR
T1 - What insiders know about future earnings and how they use it
T2 - Evidence from insider trades
AU - Ke, Bin
AU - Huddart, Steven
AU - Petroni, Kathy
N1 - Funding Information:
We thank Daniel Beneish, Alan Douglas, Santhosh Gowda, Steve Henning, Alan Jagolinzer, Yoshie Saito Lord, Lin Nan, Pat O'Brien, Nejat Seyhun and workshop participants at the CUNY–Baruch, the Shanghai University of Finance and Economics, Temple University, the University of California–Berkeley, the University of Indiana, the University of Waterloo, the 2001 HKUST Summer Research Symposium, the 2001 Washington, DC Area Finance Association Meeting, and 2002 American Accounting Association Meeting for helpful comments. We are grateful to David Hsieh for providing us with insider trading data. Kathy Petroni is grateful for financial support from Deloitte & Touche.
PY - 2003/8
Y1 - 2003/8
N2 - This paper provides evidence that insiders possess, and trade upon, knowledge of specific and economically significant forthcoming accounting disclosures as long as 2 years prior to the disclosure. Stock sales by insiders increase three to nine quarters prior to a break in a string of consecutive increases in quarterly earnings. Insider stock sales are greater for growth firms, before a longer period of declining earnings, and when the earnings decline at the break is greater. Consistent with avoiding an established legal jeopardy, there is little abnormal selling in the two quarters immediately prior to the break.
AB - This paper provides evidence that insiders possess, and trade upon, knowledge of specific and economically significant forthcoming accounting disclosures as long as 2 years prior to the disclosure. Stock sales by insiders increase three to nine quarters prior to a break in a string of consecutive increases in quarterly earnings. Insider stock sales are greater for growth firms, before a longer period of declining earnings, and when the earnings decline at the break is greater. Consistent with avoiding an established legal jeopardy, there is little abnormal selling in the two quarters immediately prior to the break.
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U2 - 10.1016/S0165-4101(03)00036-3
DO - 10.1016/S0165-4101(03)00036-3
M3 - Article
AN - SCOPUS:0042929878
SN - 0165-4101
VL - 35
SP - 315
EP - 346
JO - Journal of Accounting and Economics
JF - Journal of Accounting and Economics
IS - 3
ER -