Title: Insider Trading in Connected Firms During Trading Bans

Co-authored with Luc Renneboog, Tilburg University and the European Corporate Governance Institute and Yang Zhao, University of Liverpool Management School

Lunch will be available from 12pm

Abstract:

Insiders are subjected to trading bans or close periods before earnings announcements. Directors who sit on the board of more than one firm can still trade in the shares of their other firms not subject to close periods. We find that when a close period restricts trading by directors in one firm, they leverage insider information about that firm to trade in their other firms. This is supported by the positive correlation between market reactions in close and traded firms. Additionally, this correlation is moderated by the type of relationship between the two firms and the presence of institutional investors.

Keywords: insider trading, connected directors, director networks, trading bans, close periods

JEL codes: G14, G34

Acknowledgments: We are grateful for the comments and suggestions received from participants at the 2023 annual conference of the International Corporate Governance Society at IE University in Madrid. The research reported in this paper was partially funded by the Spanish State Research Agency (AEI) (/10.13039/501100011033)—Grant No. PID2020-115982RB-C22.

Bio:

Marc Goergen is a professor of finance at IE Business School. Previous appointments include UMIST and the Universities of Cardiff, Manchester, Reading and Sheffield. Marc is a Research Member of the European Corporate Governance Institute and a board member of the International Corporate Governance Society. He is an associate editor of the British Accounting Review, British Journal of Management, European Financial Management and European Journal of Finance. He is the past editor-in-chief of Annals of Corporate Governance and a past associate editor of the Journal of Banking & Finance and Journal of Corporate Finance.