Abstract
We show that trades by corporate insiders after an earnings announcement determine in part the extent of the post‐earnings announcement drift anomaly. Contrarian trades mitigate the under‐reaction to earnings announcements, and confirmatory trades allow for price discovery with price movements continuing in the same direction as the earnings surprise. These results are consistent with insider trading being a mechanism that provides relevant information on transitory or permanent changes to the earnings process, allowing the market to make appropriate inferences about the nature of the earnings surprise.
| Original language | English |
|---|---|
| Pages (from-to) | 482-508 |
| Number of pages | 27 |
| Journal | Journal of Business Finance and Accounting |
| Volume | 45 |
| Issue number | 3-4 |
| Early online date | 1 Feb 2018 |
| DOIs | |
| Publication status | Published - 1 Mar 2018 |
Research Groups and Themes
- AF Financial Markets
- AF Corporate Finance
Keywords
- earnings announcements
- insider trading
- market efficiency
- market under‐reaction
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