The effects of liquidity trading on insider trade timing when an underlying option is present

2018 ◽  
Vol 44 (10) ◽  
pp. 1250-1270
Author(s):  
Han Ching Huang ◽  
Pei-Shan Tung
Keyword(s):  
Stock Returns ◽  
Insider Trading ◽  
Private Information ◽  
Trading Volume ◽  
Future Research ◽  
Trading Activity ◽  
Content Type ◽  
Corporate Announcements ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this paper is to examine whether the underlying option impacts an insider’s propensity to purchase and sell before corporate announcements, the proportion of insiders’ trading after announcements relative to before announcements, and the insider’s profitability around corporate announcements. Design/methodology/approach The authors test whether the timing information and option have impacted on the tendency of insider trade, the percentage of all shares traded by insiders in the post-announcement to pre-announcement periods and the average cumulative abnormal stock returns during the pre-announcement period. Findings Insiders’ propensity to trade before announcements is higher for stocks without options listed than for stocks with traded options. This result is stronger for unscheduled announcements than for scheduled ones. The proportion of insiders’ trade volume after announcements relative to before announcements in stocks that have not options listed is higher than those in stocks with traded options. The positive relationship between the insiders’ signed volume and the informational content of corporate announcements is stronger in stocks without traded options than in stocks with options listed. Insider trades prior to unscheduled announcement are more profitable than those before scheduled ones. Research limitations/implications The paper examines whether there is a difference between the effects of optioned stock and non-optioned stock. Roll et al. (2010) use the relative trading volume of options to stock ratio (O/S) to proxy for informed options trading activity. Future research could explore the impact of O/S. Moreover, the authors examine how insiders with private information use such information to trade in their own firms. Mehta et al. (2017) argue that insiders also use private information to facilitate trading (shadow trading) in linked firms, such as supply chain partners or competitors. Therefore, future research could consider the impact of shadow trading. Social implications Since the insider’s propensity to buy before announcements in stocks without options listed is larger than in stocks with traded options and the relationship is stronger for unscheduled announcements than for scheduled ones, the efforts of regulators should focus on monitoring insider trading in stocks without options listed prior to unscheduled announcements. Originality/value First, Lei and Wang (2014) find that the increasing pattern of insider’s propensity to trade before unscheduled announcements is larger than that before scheduled announcements. The authors document the underlying option has impacted the insider’s propensity to purchase and sell, and the relationship is stronger for unscheduled announcements than for scheduled ones. Second, related studies show insider’s trading activity has shifted from periods before corporate announcements to periods after corporate announcements to decrease litigation risk. This paper find the underlying option has influenced the proportion of insiders’ trading after announcements relative to before announcements when the illegal insider trade-related penalties increase.

Insider trading surrounding securities class action litigation and settlement announcements

2017 ◽  
Vol 43 (1) ◽  
pp. 124-140 ◽  
Author(s):  
Frederick Davis ◽  
Behzad Taghipour ◽  
Thomas J. Walker
Keyword(s):  
Insider Trading ◽  
Private Information ◽  
Stock Prices ◽  
Class Action ◽  
Market Model ◽  
Trading Activity ◽  
Content Type ◽  
Sarbanes Oxley ◽  
Abnormal Profits ◽  
The Impact

Purpose The purpose of this paper is to investigate the trading patterns of corporate insiders, both managing and non-managing, around the announcement dates of securities class action lawsuits and related legal settlements. Design/methodology/approach The authors use market model event study methodology to examine the impact of class action litigation and settlement announcements on the stock prices of sued firms. The authors then determine the extent of abnormal insider trading surrounding such announcements by comparing insider trading activity (volume and transaction counts) to prior insider trading in the same firm, and to a matched sample of firms not experiencing such litigation announcements. A multivariate framework is utilized to provide further insight into the determinants of such abnormal insider trading. Findings The authors establish that class action litigation and settlement announcements have a significant impact on the stock prices of sued firms, and that foreknowledge of these events appears to be used by insiders to earn abnormal profits. Moreover, results indicate that managing insiders exhibit higher opportunistic abnormal trading activity than non-managing insiders. Multivariate analysis shows that size, prior firm returns, and the implementation of the Sarbanes-Oxley Act are important determinants of such insider trading. Originality/value This appears to be the first paper to analyze insider trading surrounding class action settlement announcements, and raises concerns about the ethical conduct of certain insider groups while highlighting the importance of access to private information, even amongst insiders themselves.

The impact of service innovation on firm performance: a meta-analysis

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Changli Feng ◽  
Ruize Ma ◽  
Lin Jiang
Keyword(s):  
Firm Performance ◽  
Positive Impact ◽  
Meta Analysis ◽  
Service Innovation ◽  
Future Research ◽  
Quantitative Review ◽  
Content Type ◽  
And Performance ◽  
The Impact ◽  
The Relationship

PurposeWith the rise of service economy, many companies are attempting to gain a competitive advantage through service innovation. However, the existing research has not drawn consistent conclusions about the relationship between service innovation and firm performance. Hence, the purpose of this paper is to provide a quantitative review on the service innovation-performance relationship based on research findings reported in the extant literature.Design/methodology/approachStudies from 46 peer-reviewed articles were sampled and analyzed. A meta-analytic approach was adopted to conduct a quantitative review on the relationship between service innovation and firm performance, and the effects of any potential moderators were further explored.FindingsThe results found that service innovation has a significant positive impact on firm performance. Additionally, the relationship between service innovation and firm performance is influenced by measurement moderators (economic region and performance measurement), and contextual moderators (firm type, innovation type, customer factors and attitudes toward risk).Originality/valueThe meta-analysis has been used to explore the relationship between service innovation and firm performance, and the findings have contributed to the literature on service innovation, as well as providing future research directions.

The impact of the motivation for status on consumers’ perceptions of retailer sustainability: the moderating impact of collectivism and materialism

2017 ◽  
Vol 34 (4) ◽  
pp. 292-305 ◽  
Author(s):  
Mertcan Tascioglu ◽  
Jacqueline Kilsheimer Eastman ◽  
Rajesh Iyer
Keyword(s):  
Environmental Sustainability ◽  
Generational Differences ◽  
Age Groups ◽  
Social Sustainability ◽  
Cultural Dimensions ◽  
Future Research ◽  
Bandwagon Effect ◽  
Content Type ◽  
The Impact ◽  
The Relationship

Purpose The purpose of the study is to investigate consumers’ perceptions of status motivations on retailers’ sustainability efforts and whether collectivism and materialism moderate this relationship. Design/methodology/approach A quantitative research methodology using survey data was used. Data were collected by administering questionnaires from millennial respondents (n = 386) from the USA and Turkey. Findings The results show that cultural value (collectivism) and materialism can serve as moderators of the effects of status motivation and sustainability. The findings indicate that the link between status motivation and sustainability perceptions (both environmental and social sustainability) is stronger for more collectivist consumers. In terms of materialism, while it did not moderate the relationship between status motivation and perceptions of environmental sustainability, it did moderate the relationship between status motivation and perceptions of social sustainability, particularly the uniqueness aspect of materialism. Research limitations/implications The stronger link between status motivation and both environmental and social sustainability for collectivists suggests that the bandwagon effect may be impacting their need for status. The stronger link between status motivation and social sustainability for those more materialistic suggests that their need for status may be more impacted by a snob effect as they want to appear unique. The use of college students is a limitation of this study, and future research needs to explore a wider range of age groups to determine if there are generational differences. Additionally, future research could examine other cultural dimensions such as power distance and masculinity versus femininity. Practical implications Findings from this research provide insights for retailers, especially those targeting the status and luxury market when developing their sustainability plans. An interest in sustainability may aid consumers in meeting their need for status, particularly for those status consumers who are more collectivist, as a means to fit in with their group. For more materialistic consumers, retailers may want to focus more on unique social sustainability efforts that are more publicly noticeable. Social implications Social sustainability, a topic not studied as frequently as environmental sustainability, has significant implications for consumers. The findings suggest that the link between status motivation and social sustainability is stronger for collectivists, suggesting a bandwagon effect. Additionally, the authors find that the link between status motivation and social sustainability is stronger for materialists, particularly the uniqueness dimension of materialism, suggesting a snob effect. Originality/value The originality of this study lies in the exploration of how status motivation impacts consumers’ perceptions of retailers’ environmental and social sustainability efforts and if these relationships are moderated by collectivism and materialism. Few studies have examined social sustainability, especially in terms of culture.

scholarly journals After-Hours Block Trading, Short Sales, And Information Leakage: Evidence From Korea

2017 ◽  
Vol 33 (2) ◽  
pp. 263-282 ◽  
Author(s):  
Taehoon Lee ◽  
Sang-gyung Jun
Keyword(s):  
Stock Returns ◽  
Insider Trading ◽  
Private Information ◽  
Stock Price ◽  
Stock Return ◽  
Governance Structure ◽  
Sales Volume ◽  
Short Sales ◽  
After Hours ◽  
The Impact

We investigate the impact of insider trading in after-hours block market on stock price and short sales volume, before and after the trading becomes public information. During pre-announcement period, positive (negative) abnormal stock return is generated when insiders buy (sell) their shares but does not when quasi-insiders trade, implying that stock price reflects long-lived private information of corporate governance structure. The impact is most prominent when ownership shares are transferred to (from) corporate insiders. In contrast, short sales volume generally does not depend on the identity of block holders. Short sales volume has a negative correlation with abnormal stock return only during the transaction date, indicating that a short-sale decision of tippees is based on their sole expectation on instantaneous stock returns. We also find evidence that insiders select the timing of their trades with respect to maximizing their realized profits or minimizing their purchasing costs. 

Heterogeneous beliefs and idiosyncratic volatility puzzle: evidence from China

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mao He ◽  
Juncheng Huang ◽  
Hongquan Zhu
Keyword(s):  
Stock Returns ◽  
Trading Volume ◽  
Factor Model ◽  
Heterogeneous Beliefs ◽  
Idiosyncratic Volatility ◽  
Chinese Stock Market ◽  
Content Type ◽  
Volatility Puzzle ◽  
The Relationship ◽  
Idiosyncratic Volatility Puzzle

PurposeThe purpose of our study is to explore the “idiosyncratic volatility puzzle” in Chinese stock market from the perspective of investors' heterogeneous beliefs. To delve into the relationship between idiosyncratic volatility and investors' heterogeneous beliefs, and uncover the ability of heterogeneous beliefs, as well as to explain the “idiosyncratic volatility puzzle”, we construct our study as follows.Design/methodology/approachOur study adopts the unexpected trading volume as proxies of heterogeneity, the residual of Fama–French three-factor model as proxies of idiosyncratic volatility. Portfolio strategies and Fama–MacBeth regression are used to investigate the relationship between the two proxies and stock returns in Chinese A-share market.FindingsInvestors' heterogeneous beliefs, as an intermediary variable, are positively correlated with idiosyncratic volatility. Meanwhile, it could better demonstrate the negative correlation between the idiosyncratic volatility and future stock returns. It is one of the economic mechanisms linking idiosyncratic volatility to subsequent stock returns, which can account for 11.28% of the puzzle.Originality/valueThe findings indicate that idiosyncratic volatility is significantly and positively correlated with heterogeneous beliefs and that heterogeneous beliefs are effective intervening variables to explain the “idiosyncratic volatility puzzle”.

Doping scandals in professional cycling: impact on primary team sponsor’s stock return

2016 ◽  
Vol 17 (1) ◽  
pp. 37-55 ◽  
Author(s):  
Karen Danylchuk ◽  
Jelmer Stegink ◽  
Katie Lebel
Keyword(s):  
Stock Returns ◽  
Stock Return ◽  
Grand Tour ◽  
Content Type ◽  
Time Period ◽  
Study Methodology ◽  
The Impact ◽  
The Relationship ◽  
Professional Cycling ◽  
Event Study Methodology

Purpose – The purpose of this paper is to examine the impact of doping scandals (n=25) in professional cycling Grand Tour events on the primary team sponsor’s daily stock return. Design/methodology/approach – Event study methodology. Findings – Overall it was found that during the time period and events under examination in this study doping scandals had no significant impact on the primary team sponsor’s stock returns. Originality/value – There is limited research to explain the economic impact of widespread doping in cycling and its commercial shareholders. This study addresses this gap by examining the relationship between doping scandals in professional cycling and the daily stock return of the involved team’s primary sponsor.

Individual investor attention to stock split and the disposition effect

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Wendy Kesuma ◽  
Irwan Adi Ekaputra ◽  
Dony Abdul Chalid
Keyword(s):  
Stock Returns ◽  
Private Information ◽  
Stock Exchange ◽  
Stock Splits ◽  
Disposition Effect ◽  
Individual Investors ◽  
Investor Attention ◽  
Content Type ◽  
Stock Split ◽  
The Impact

PurposeThis paper investigates whether individual investors are attentive to stock splits and whether higher split ratios (stronger private information signals) reduce the disposition effect.Design/methodology/approachThis study employs stock split events and transaction data in the Indonesia Stock Exchange (IDX) from January 2004 to December 2017. The authors measure individual investors' attention using buy-initiated trades. To test the effect of split signal on disposition effect, the authors regress individual investors' sell-initiated trades on past stock returns.FindingsUnlike Birru (2015), the authors find that individual investors are attentive to stock splits, especially when stock split ratios are high. In turn, stock splits tend to weaken the disposition effect. The higher the stock split ratios, the weaker the disposition effect.Research limitations/implicationsThis study has a limitation in that the authors exclude all stock splits with dividend events around the split date. These stock splits cover 37% of all splits in Indonesia.Practical implicationsPractically, individual investors should look for stock-related information to reduce disposition bias.Originality/valueTo the best of authors’ knowledge, this study is the first to test individual investors' attention on stock splits based on their buy-initiated trades. This study is also the first to test the impact of stock split ratios on the disposition effect reduction. This study's findings enrich the scant literature on individual investors' attention and how to reduce their disposition effect bias.

Export market orientation and export performance in emerging markets: insights from the Peruvian agri-export sector

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Oscar Malca ◽  
Jean Pierre Bolaños ◽  
Jorge Luis Rubio Donet ◽  
Francisco Acedo
Keyword(s):  
Emerging Markets ◽  
Market Orientation ◽  
Export Performance ◽  
Export Market ◽  
Future Research ◽  
Content Type ◽  
Export Sector ◽  
Relational Norms ◽  
The Impact ◽  
The Relationship

PurposeThe objective of this research is to analyse the joint impact of export proactivity and coordination capacity as mediators on the relationship between export market orientation (EMO) and export performance and the relational norms and export continuity as EMO's antecedents.Design/methodology/approachThe study uses structural equation modelling for the analysis of 127 small and medium enterprises (SMEs) from the agri-export sector in Peru.FindingsThe research demonstrates the mediating role of export proactivity between EMO and export performance and the impact of relational norms as an antecedent of EMO as well as that of export continuity in export performance.Research limitations/implicationsThe cross-sectional study design has certain limitations; thus, longitudinal research is necessary to analyse the evolution of the impact of these variables. Future research should also consider new variables, such as absorptive capacity and institutional distance, in relation to EMO and export performance in emerging markets.Originality/valueThis research paper provides a perspective that is an alternative to the traditional literature related to EMO since coordination capacity and export proactivity have been used as EMO's antecedents. However, in emerging countries, such as Peru, exports are based on comparative advantages. Under this context, it is necessary to analyse export proactivity and coordination capacity as mediators of the relationship between EMO and export performance and the relational norms and export continuity as EMO's antecedents.

Family ownership and R&D investment: the moderating role of banks and private equity

2019 ◽  
Vol 57 (7) ◽  
pp. 1675-1694 ◽  
Author(s):  
Alessandro Cirillo ◽  
Mario Ossorio ◽  
Luca Pennacchio
Keyword(s):  
Family Involvement ◽  
Private Equity ◽  
Family Firms ◽  
Negative Relationship ◽  
Future Research ◽  
Family Ownership ◽  
Content Type ◽  
The Impact ◽  
The Relationship ◽  
D Investment

Purpose The purpose of this paper is to contribute to innovation and family business literature by establishing whether institutional involvement of private equity (PE) and banks in family firms moderates the relationship between family ownership and research and development (R&D) investment. Design/methodology/approach This paper used the socio-emotional wealth lens to carry out an econometric analysis on a large sample of Italian non-listed family firms. Using the sample selection model meant it was possible to account for potential selection bias arising from firms’ discretionary disclosure of R&D expenditure. Findings Family involvement in ownership reduced firms’ R&D intensity. When PE investors also held shares, the negative relationship was diverted. Bank involvement, however, did not have a significant effect on the relationship. Research limitations/implications This paper enriches the innovation management literature by increasing the understanding of the determinants of R&D investments in family firms. The results support the view that non-financial priorities in family firms are contingent upon non-family shareholders. This enriches the debate about the heterogeneity of family businesses and is consistent with the socio-emotional wealth framework, which has shown that risk preferences may vary if desired and actual performances are different. This may be a fruitful area for future research. Originality/value Contradicting the assumption that institutional owners all share the same perspective, this study is the first to assess the impact of different institutional shareholders on R&D intensity of private family firms.

Efficiency of heterogeneity measures: an asset pricing perspective

2015 ◽  
Vol 5 (4) ◽  
pp. 371-385 ◽  
Author(s):  
Lu Qin ◽  
Hongquan Zhu
Keyword(s):  
Stock Returns ◽  
Trading Volume ◽  
Earnings Forecasts ◽  
Forecast Dispersion ◽  
Effective Measure ◽  
Content Type ◽  
Investor Heterogeneity ◽  
Portfolio Strategies ◽  
The Relationship ◽  
A Share

Purpose – The purpose of this paper is to identify the effective measures for heterogeneity and to uncover the relationship between investor heterogeneity and stock returns. Design/methodology/approach – The paper employs dispersion in analysts’ earnings forecasts and unexpected trading volume as proxies of heterogeneity. Portfolio strategies and Fama-Macbeth regression are used to uncover the relationship between the two proxies and stock returns in the Chinese A-share market. Findings – The result indicates that stock returns are significantly related to unexpected trading volume, i.e., higher unexpected trading volume implies higher stock returns now but lower future stock returns. In contrast, there is no statistically significant relationship between analysts’ forecast dispersion and stock returns. Originality/value – The findings suggest that unexplained trading volume is an effective measure for investor heterogeneity in the Chinese A-share market.

Sign in / Sign up

Export Citation Format

Share Document