What insiders know about future earnings and how they use it: Evidence from insider trades

Bin Ke, Steven Huddart, Kathy Petroni

Research output: Contribution to journalArticlepeer-review

220 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)315-346
Number of pages32
JournalJournal of Accounting and Economics
Volume35
Issue number3
DOIs
StatePublished - Aug 2003

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

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