Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/100343
Authors: 
Gider, Jasmin
Year of Publication: 
2014
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2014: Evidenzbasierte Wirtschaftspolitik - Session: Financial Markets and Information G09-V3
Abstract: 
The paper explores the consequences of SEC detection of illegal insider trading on subsequent insider trading activities. We hypothesize that individuals with private information update their subjective probabilities of getting caught and are less likely to exploit material, non-public information about pending earnings announcements. The hypothesis is tested using data on earnings announcements of a unique hand-collected sample of 398 insider trading episodes publicly detected by the Securities and Exchange Commission (SEC). Based on a difference-in-differences analysis where we compare firms with a detection event, their industry peers and firms in remote industries, we document a statistically and economically significant deterrence effect: In the vicinity of the detection target post detection the run-ups prior to earnings announcements are significantly reduced by 0.7%.
JEL: 
G38
G18
G14
Document Type: 
Conference Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.