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Uncertain times and the insider perspective

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journal contribution
posted on 2022-06-07, 15:15 authored by B Lambe, Z Li, W Qin

This paper examines insiders' informational privilege by studying the nexus between aggregated self-reported insider trades and Economic Policy Uncertainty (EPU). We demonstrate that firm insiders act in response to the first signs of uncertainty as it appears in the media, and high-ranked managers, such as CEOs and CFOs, react more promptly than other insiders. Our findings further support the idea that insiders' indirect informational advantages allow them to interpret the significance of public information for cash flows more accurately in their own companies. Our study is the first to examine insiders' behavior using pure public information; it is also the first to exclude the influence of private information completely. We also consider various measures of EPU, including global and categorical indices representing economic, political uncertainty, while taking the financial crisis period into account.

History

Citation

International Review of Financial Analysis Volume 81, May 2022, 102138

Author affiliation

School of Business, University of Leicester

Version

  • AM (Accepted Manuscript)

Published in

International Review of Financial Analysis

Volume

81

Pagination

102138

Publisher

Elsevier BV

issn

1057-5219

Acceptance date

2022-04-01

Copyright date

2022

Available date

2023-10-04

Language

en

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