scholarly journals Mispricing of Book-Tax Differences and the Trading Behavior of Short Sellers and Insiders

2013 ◽  
Vol 89 (2) ◽  
pp. 511-543 ◽  
Author(s):  
Sabrina S. Chi ◽  
Morton Pincus ◽  
Siew Hong Teoh
Keyword(s):  
Stock Returns ◽  
Insider Trading ◽  
Short Selling ◽  
Data Availability ◽  
Large Set ◽  
Trading Behavior ◽  
Earnings Growth ◽  
The Public ◽  
Short Sellers ◽  
Abnormal Stock Returns

ABSTRACT We find evidence that investors misprice information contained in book-tax differences (BTDs), measured as the ratio of taxable income to book income, TI/BI. Low TI/BI predicts worse earnings growth and abnormal stock returns than high TI/BI. We find that short sellers and insiders arbitrage BTD mispricing, but the arbitrage is imperfect because of constraints on short selling and insider trading. Under SFAS No. 109 the predictability is stronger for TEMP/BI, the temporary component of TI/BI, which reflects greater managerial discretion. The results are incremental to a large set of known accruals-based anomaly predictors. We suggest that a sunshine policy of disclosing a reconciliation of book and taxable incomes can reduce mispricing of BTDs and improve capital market resource allocation. Data Availability: Data are obtained from the public sources as indicated in the text.

scholarly journals How Main Street Drives Wall Street: Customer (Dis)satisfaction, Short Sellers, and Abnormal Returns

2020 ◽  
Vol 57 (6) ◽  
pp. 1055-1075
Author(s):  
Ashwin Malshe ◽  
Anatoli Colicev ◽  
Vikas Mittal
Keyword(s):  
Customer Satisfaction ◽  
Stock Returns ◽  
Abnormal Returns ◽  
Capital Intensity ◽  
Trading Behavior ◽  
Short Sellers ◽  
Unit Increase ◽  
Abnormal Stock Returns ◽  
Customer Dissatisfaction ◽  
The Impact

Although previous studies have established a direct link between customer-based metrics and stock returns, research is unclear on the mediated nature of their association. The authors examine the association of customer satisfaction and abnormal stock returns, as mediated by the trading behavior of short sellers. Using quarterly data from 273 firms over 2007–2017, the authors find that short interest—a measure of short seller activity—mediates the impact of customer satisfaction and dissatisfaction on abnormal stock returns. Customer dissatisfaction has a more pronounced effect on short selling compared with customer satisfaction. In addition, customer satisfaction and dissatisfaction are more relevant for firms with low capital intensity and firms that face lower competitive intensity. The results show that a one-unit increase in customer satisfaction is associated with a .56 percentage point increase in abnormal returns, while a one-unit increase in customer dissatisfaction is associated with a 1.34 percentage point decrease in abnormal returns.

Do Short Sellers Trade on Private Information or False Information?

2018 ◽  
Vol 53 (3) ◽  
pp. 997-1023 ◽  
Author(s):  
Amiyatosh Purnanandam ◽  
H. Nejat Seyhun
Keyword(s):  
Stock Returns ◽  
Insider Trading ◽  
Private Information ◽  
Short Selling ◽  
Informational Efficiency ◽  
False Information ◽  
Market Prices ◽  
Short Sellers ◽  
Additional Information ◽  
Trading Activities

We investigate whether short sellers contribute toward the informational efficiency of market prices by trading on their private information or destabilize market prices by trading on rumors and false information. We find that short-selling activities are considerably informative about future stock returns when there is a higher likelihood of private information in stocks, as measured by insider-trading activities. Short sellers also bring considerable additional information to the market that is not fully captured by contemporaneous insider trading. Overall, these results suggest that on average, short sellers bring informational efficiency to market prices rather than destabilize them.

scholarly journals The Relationship of Insider Trading Announcements, Ownership Structure and Corporate Governance: An Event Study Analysis of Athens Stock Exchange Market Technology Firms

2019 ◽  
Vol 11 (7) ◽  
pp. 13 ◽  
Author(s):  
Ioannis Antoniadis ◽  
Christos Gkasis ◽  
Stamatis Kontsas
Keyword(s):  
Corporate Governance ◽  
Stock Returns ◽  
Event Study ◽  
Insider Trading ◽  
Boards Of Directors ◽  
Stock Exchange ◽  
Time Windows ◽  
Abnormal Stock Returns ◽  
Athens Stock Exchange ◽  
The Relationship

In the present paper, the relationship between corporate governance mechanisms of a firm and stock returns triggered by insider trading announcements is examined. Event study methodology has been used to evaluate the influence of 636 insider trading announcements performed by executives of 14 listed firms in the Athens Stock Exchange, that operate in the technology sector, during the period 2007-2013. The relationship between cumulative abnormal stock returns (CARs), caused by the announcements, and corporate governance characteristics, was then examined for different time windows, both for sales and purchases of stocks by insiders. Our findings suggest that insider trading, especially in purchases, performed by CEOs and members of the Boards of Directors, has a significant effect on stock returns in the long run. More specifically concentrated ownership structures and control were found to have a negative/positive effect in abnormal stock returns of the firms only in long-term periods of time following the announcement of purchases/sales.

Short-Selling and Information Arrival around Earnings Announcements: Evidence from Regulation SHO

2021 ◽  
Author(s):  
Greg Clinch ◽  
Wei Li
Keyword(s):  
Stock Prices ◽  
Earnings Announcements ◽  
Public Information ◽  
Short Selling ◽  
Price Informativeness ◽  
The Public ◽  
Short Sellers ◽  
Information Release ◽  
Negative News ◽  
Shed Light

Short sellers assist in impounding negative news more quickly into stock prices and improve price informativeness. However, there is a lack of consistent evidence about whether short sellers trade predominantly in anticipation of, or in response to, a public information release. To shed light on this question, we exploit Reg SHO, which reduced the constraints faced by short sellers for a subsample of U.S. firms, to examine price informativeness before, during and after earnings announcements. We show that relative to control firms, pilot firms have greater (less) price informativeness before (during) earnings announcements, suggesting that short sellers trade in anticipation of public earnings news, rather than in response to the public news.

scholarly journals Corporate Governance, Shareholder Rights, and Shareholder Rights Plans: Poison, Placebo, or Prescription?

2008 ◽  
Vol 43 (2) ◽  
pp. 381-400 ◽  
Author(s):  
Gary L. Caton ◽  
Jeremy Goh
Keyword(s):  
Corporate Governance ◽  
Stock Returns ◽  
Firm Value ◽  
Abnormal Returns ◽  
Governance Structure ◽  
Shareholder Rights ◽  
Corporate Governance Structure ◽  
Earnings Growth ◽  
Forecast Revisions ◽  
Abnormal Stock Returns

AbstractWe examine the effect of poison pill adoptions on firm value, controlling for the adopting firm's preexisting corporate governance structure. We find that only companies with the most democratic governance structures, defined as those with the fewest preexisting protective governance provisions, experience significantly positive abnormal stock returns and significantly positive abnormal revisions in five-year earnings growth rate forecasts. Moreover, regression results indicate that abnormal returns and forecast revisions are significantly related to governance structure and not to board composition or subsequent merger activity.

Securitization and Insider Trading

2015 ◽  
Vol 91 (2) ◽  
pp. 649-675 ◽  
Author(s):  
Stephen G. Ryan ◽  
Jennifer Wu Tucker ◽  
Ying Zhou
Keyword(s):  
Financial Crisis ◽  
Stock Returns ◽  
Business Model ◽  
Insider Trading ◽  
Private Information ◽  
Stock Price ◽  
Data Availability ◽  
Insider Information ◽  
Negatively Associated ◽  
Crisis Period

ABSTRACT Securitizations are complex and opaque transactions. We hypothesize that bank insiders trade on private information about banks': (1) securitization-related recourse risks, (2) not-yet-reported current-quarter securitization income, and (3) securitization-based business model sustainability. We provide evidence that proxies for each of these types of insider information are positively associated with insider trading. Specifically, we find that net insider sales in the 2001Q2–2007Q2 pre-financial crisis quarters predict not-yet-reported non-performing securitized loans and securitization income for those quarters, and that net insider sales during 2006Q4 predict write-downs of securitization-related assets during the 2007Q3–2008Q4 crisis period. We find that net insider sales are more negatively associated with banks' subsequent stock returns in their securitization quarters than in other quarters. In supplemental analysis, we show that the above findings are driven by trades by banks' CEOs and CFOs, and that insiders avoid larger stock price losses through 10b5-1 plan sales than through non-plan sales. Data Availability: All data are available from public sources.

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