TY - JOUR
T1 - Director discretion and insider trading profitability
AU - Foley, Sean
AU - Kwan, Amy
AU - McInish, Thomas H
AU - Philip, Richard
PY - 2016/9
Y1 - 2016/9
N2 - Using a machine-learning algorithm, we classify over 60,000 director transactions into discretionary and non-discretionary purchases and sales based on the trading motive provided by the insider. We find that discretionary trades by company insiders are more informed than non-discretionary trades. Further, discretionary purchases generate higher abnormal returns (1) for larger purchases, or when the purchase is for (2) the stock of a smaller firm, or (3) a firm with greater information asymmetry.
AB - Using a machine-learning algorithm, we classify over 60,000 director transactions into discretionary and non-discretionary purchases and sales based on the trading motive provided by the insider. We find that discretionary trades by company insiders are more informed than non-discretionary trades. Further, discretionary purchases generate higher abnormal returns (1) for larger purchases, or when the purchase is for (2) the stock of a smaller firm, or (3) a firm with greater information asymmetry.
KW - Insider trading
KW - Director discretion
UR - http://www.scopus.com/inward/record.url?scp=85028241510&partnerID=8YFLogxK
U2 - 10.1016/j.pacfin.2016.05.005
DO - 10.1016/j.pacfin.2016.05.005
M3 - Article
VL - 39
SP - 28
EP - 43
JO - Pacific-Basin Finance Journal
JF - Pacific-Basin Finance Journal
SN - 0927-538X
ER -