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Insider Trading Earnings Management And Information Asymmetry
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Book Synopsis Insider Trading, Earnings Management and Information Asymmetry by : Abu Zakir Md Rasel Chowdhury
Download or read book Insider Trading, Earnings Management and Information Asymmetry written by Abu Zakir Md Rasel Chowdhury and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Insider trading is highly tied to earnings management in an asymmetric information environment. Using US data during 2004-2012 and different discretionary accrual measures, we reveal that insiders net purchase ratio dominated by sales, insider purchase ratio and cumulative abnormal return are positively associated with absolute value of earnings management (earnings quality). We also document high earnings management practice in growth firms (low book-to market) than value firms (high book-to market) as well as active involvement of major insiders (e.g. CEO) in such practice for personal benefits. A leading role of information asymmetry and its moderation effect is prevalent. Further evidence also suggests manipulation of earnings for insiders' opportunistic trading over routine trading. Overseeing the earnings management and insider trading behavior simultaneously by the regulators is identified as an important policy issue in this research.
Book Synopsis Management Earnings Forecasts, Insider Trading, and Information Asymmetry by : Anastasia Kraft
Download or read book Management Earnings Forecasts, Insider Trading, and Information Asymmetry written by Anastasia Kraft and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate whether senior officers use accrual-based earnings management to meet voluntary earnings disclosure (i.e., management earnings forecasts) before selling or buying their own shares when they have private information. This study is the first to use the differences in timing of trades by senior officers and other insiders (e.g., directors or large shareholders) to infer information asymmetry. We hypothesize that the timing of senior officers' trades with no other insiders' trades at the same time indicates opportunistic trades and asymmetric information between senior officers and other insiders. Our results show that senior officers' exclusive sales are negatively associated with future returns, indicating that they tend to use insider information. Moreover, senior officers are more likely to meet their earnings forecasts when they plan to sell stocks.
Book Synopsis Earnings Management and Insider Trading Around Seasoned Equity Offerings by : Loretta Nartekie Baryeh
Download or read book Earnings Management and Insider Trading Around Seasoned Equity Offerings written by Loretta Nartekie Baryeh and published by . This book was released on 2008 with total page 164 pages. Available in PDF, EPUB and Kindle. Book excerpt: Given the information asymmetry between insiders and investors involved in SEO regarding the firm's plans on how to invest the proceeds from the SEO and the consequent effect on firm's value, insiders have an opportunity to engage in profitable insider trading. This, in turn, provides the market with a signal on firm's intentions. In this study, I examine a sample of 1555 firms that conducted SEOs in the 1987 to 2005 period and their insiders' trading pattern. I find that firms engage in aggressive earnings management to inflate reported earnings. Insiders of SEO firms exhibit the contrarian pattern of trading as shown by my findings of upwards earnings management for value firms. The market is aware of the importance of the insider trading signal. Still, insider trading patterns before and after the SEO year suggest that the market is unable to value the firm correctly. The Sarbanes-Oxley Act of 2002 decreased the scope of earnings management by SEO firms.-- Abstract.
Book Synopsis Introduction to Earnings Management by : Malek El Diri
Download or read book Introduction to Earnings Management written by Malek El Diri and published by Springer. This book was released on 2017-08-20 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides researchers and scholars with a comprehensive and up-to-date analysis of earnings management theory and literature. While it raises new questions for future research, the book can be also helpful to other parties who rely on financial reporting in making decisions like regulators, policy makers, shareholders, investors, and gatekeepers e.g., auditors and analysts. The book summarizes the existing literature and provides insight into new areas of research such as the differences between earnings management, fraud, earnings quality, impression management, and expectation management; the trade-off between earnings management activities; the special measures of earnings management; and the classification of earnings management motives based on a comprehensive theoretical framework.
Book Synopsis Corporate Governance, Earning Quality and Information Asymmetry by : Allan Hodgson
Download or read book Corporate Governance, Earning Quality and Information Asymmetry written by Allan Hodgson and published by . This book was released on 2016 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the performance and its link with information asymmetry, corporate governance and legal enforcement of insider transactions in 36 countries covering 10 Asian countries, 20 European countries and 6 countries in the rest. The results show that abnormal returns after insider trading are generally positive over time especially on Monday (insider sales) and Friday (insider purchase) for both executive and non-executive directors. The insider trading performance is typically related to earnings management which is measured by accruals. Corporate insider trading is informative and can assist in the analysis of future prospect of the firm. The zero-investment portfolios based on insider trading and accruals offers positive returns in most of the countries. However, after adjusting market risk, the profit of insider trading portfolios remain only in a few countries. The regression analysis exhibit the importance of corporate governance to limit the insider profits.
Book Synopsis Earnings Management by : Joshua Ronen
Download or read book Earnings Management written by Joshua Ronen and published by Springer Science & Business Media. This book was released on 2008-08-06 with total page 587 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is a study of earnings management, aimed at scholars and professionals in accounting, finance, economics, and law. The authors address research questions including: Why are earnings so important that firms feel compelled to manipulate them? What set of circumstances will induce earnings management? How will the interaction among management, boards of directors, investors, employees, suppliers, customers and regulators affect earnings management? How to design empirical research addressing earnings management? What are the limitations and strengths of current empirical models?
Download or read book Insider Trading written by Paul U. Ali and published by CRC Press. This book was released on 2008-08-22 with total page 452 pages. Available in PDF, EPUB and Kindle. Book excerpt: Insider trading has long been considered an endemic feature of the world's financial markets. It is unsurprising that the recent growth in mergers and acquisitions worldwide has been accompanied by a growth in insider trading, on a scale not witnessed since the 1980's takeovers boom. Insider Trading: Global Developments and Analysis brings together the latest law and finance research on insider trading. It provides expert coverage on the established US, European, and Asia-Pacific securities markets, as well as the key emerging markets of Brazil and the greater China region. Providing high interest and up-to-date content, the book features several recent cases, including that of Martha Stewart.
Book Synopsis The Law and Finance of Corporate Insider Trading: Theory and Evidence by : Hamid Arshadi
Download or read book The Law and Finance of Corporate Insider Trading: Theory and Evidence written by Hamid Arshadi and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 171 pages. Available in PDF, EPUB and Kindle. Book excerpt: A thorough analysis of insider trading requires the integration of law and finance, and this book presents a theoretical and empirical examination of insider trading by incorporating a synthesis of securities law with that of financial theory. The book begins with a conceptual framework that explores the theoretical roles of markets, firms and publicly held corporations, including a discussion of corporate governance to determine both who may have access to nonpublic information, and their legal rights and responsibilities. The book then examines different aspects of the securities laws, including the Securities Act of 1933, the Securities Exchange Act of 1934, and a critique of the SEC disclosure rules and their ramifications for market efficiency. This is followed by a detailed chronology of insider trading regulations enacted in the U.S. since 1934 and an overview of the existing empirical literature on insider trading. Empirical evidence is presented on insider trading activities and the merit of anti-insider trading laws is evaluated on theoretical arguments and recent empirical developments. The authors conclude by arguing that insider trading laws and enforcement activities have failed and propose the decriminalization of insider trading.
Book Synopsis Insider Trading Disclosure, Information Asymmetry, and Differential Earnings Relevance as Indicated By Trading Volume by : Donn W. Vickrey
Download or read book Insider Trading Disclosure, Information Asymmetry, and Differential Earnings Relevance as Indicated By Trading Volume written by Donn W. Vickrey and published by . This book was released on 2007 with total page 14 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use buy and sell signals derived from insider trading disclosures to identify experimental-group cases in which decreases in earnings-related predisclosure information asymmetry have arisen through the use of the disclosures. For each experimental firm, each earnings-announcement date is preceded, within 90 days, by at least 2 specific buy or 2 specific sell signals, while none of these signals occurs within 90 days of any control group earnings-announcement date. Our null hypothesis is that mean differences in experimental and control group earnings-announcement-period trading volumes are greater than or equal to similar mean differences occurring over contiguous non-announcement periods. Rejection of our null, for various periods, implies less earnings relevance for our experimental group vis-agrave;-vis our control group as a consequence of decreases in earnings-related predisclosure information asymmetry for the latter. This result is consistent with the view that changes in firms' information environments are the most pervasive factor explaining secular changes in earnings relevance.
Book Synopsis Remedies to Informational Asymmetries in Stock Markets by : Peter-Jan Engelen
Download or read book Remedies to Informational Asymmetries in Stock Markets written by Peter-Jan Engelen and published by Intersentia nv. This book was released on 2005 with total page 4 pages. Available in PDF, EPUB and Kindle. Book excerpt: Like many other markets, stock markets are characterised by asymmetric information. If investors cannot distinguish high-quality from low-quality securities, they will value all securities as average resulting in the well known market for lemons. This decreases the allocative efficiency and social welfare by guiding resources to the least good investment opportunities. How can high-quality listed companies communicate with stock markets to distinguish themselves from low-quality listed companies? Although proponents of mandatory disclosure rules in securities markets will answer this question with far-reaching governmental regulation, it is jumping to conclusions and skipping devices that signal the true quality of the investment opportunities to the stock market. This book analyses the functioning of stock markets, in particular the dissemination of price-sensitive information on these markets. In order to evaluate the legal rules governing the dissemination of information from an economic perspective, an operational framework is needed to assess the current disclosure regulation with respect to allocative efficiency. The book replaces vague legal goals of securities regulation, such as investors' protection, by financial economic concepts, such as market efficiency and market liquidity. To enhance allocative efficiency, the book analyses the relevancy of mandatory disclosure rules, the use of trading halts in disseminating information during the opening hours of a stock exchange, the use of selective disclosure and the regulation of insider trading.
Book Synopsis Research Handbook on Insider Trading by : Stephen M. Bainbridge
Download or read book Research Handbook on Insider Trading written by Stephen M. Bainbridge and published by Edward Elgar Publishing. This book was released on 2013-01-01 with total page 498 pages. Available in PDF, EPUB and Kindle. Book excerpt: In most capital markets, insider trading is the most common violation of securities law. It is also the most well known, inspiring countless movie plots and attracting scholars with a broad range of backgrounds and interests, from pure legal doctrine to empirical analysis to complex economic theory. This volume brings together original cutting-edge research in these and other areas written by leading experts in insider trading law and economics. The Handbook begins with a section devoted to legal issues surrounding the USÕs ban on insider trading, which is one of the oldest and most energetically enforced in the world. Using this section as a foundation, contributors go on to discuss several specific court cases as well as important developments in empirical research on the subject. The Handbook concludes with a section devoted to international perspectives, providing insight into insider trading laws in China, Japan, Australia, New Zealand, the United Kingdom and the European Union. This timely and comprehensive volume will appeal to students and professors of law and economics, as well as scholars, researchers and practitioners with an interest in insider trading.
Book Synopsis Insider Trading and Earnings Management by : Thomas Alan Issaevitch
Download or read book Insider Trading and Earnings Management written by Thomas Alan Issaevitch and published by . This book was released on 2008 with total page 230 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Insider Trading and Earnings Management by : Julia Sawicki
Download or read book Insider Trading and Earnings Management written by Julia Sawicki and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the relationship between earnings management and insider trading, specifically investigating whether discretionary accruals are related to insider trading and valuation. We find strong evidence of insiders managing earnings downward when buying and managing earnings upward when selling. On the marginal basis, value (high book-to-market value) firms manage their earnings upward compared to growth (low book-to-market value) firms, consistent with a signaling hypothesis. However the opposite is true on the average basis, consistent with an opportunistic hypothesis.
Book Synopsis Earnings Quality by : Jennifer Francis
Download or read book Earnings Quality written by Jennifer Francis and published by Now Publishers Inc. This book was released on 2008 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt: This review lays out a research perspective on earnings quality. We provide an overview of alternative definitions and measures of earnings quality and a discussion of research design choices encountered in earnings quality research. Throughout, we focus on a capital markets setting, as opposed, for example, to a contracting or stewardship setting. Our reason for this choice stems from the view that the capital market uses of accounting information are fundamental, in the sense of providing a basis for other uses, such as stewardship. Because resource allocations are ex ante decisions while contracting/stewardship assessments are ex post evaluations of outcomes, evidence on whether, how and to what degree earnings quality influences capital market resource allocation decisions is fundamental to understanding why and how accounting matters to investors and others, including those charged with stewardship responsibilities. Demonstrating a link between earnings quality and, for example, the costs of equity and debt capital implies a basic economic role in capital allocation decisions for accounting information; this role has only recently been documented in the accounting literature. We focus on how the precision of financial information in capturing one or more underlying valuation-relevant constructs affects the assessment and use of that information by capital market participants. We emphasize that the choice of constructs to be measured is typically contextual. Our main focus is on the precision of earnings, which we view as a summary indicator of the overall quality of financial reporting. Our intent in discussing research that evaluates the capital market effects of earnings quality is both to stimulate further research in this area and to encourage research on related topics, including, for example, the role of earnings quality in contracting and stewardship.
Book Synopsis Sarbanes-Oxley Act, Insider Trading and Earningsmanagement by : Rexon Tayong Nting
Download or read book Sarbanes-Oxley Act, Insider Trading and Earningsmanagement written by Rexon Tayong Nting and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The empirical motivation of this dissertation is the increasing importance of financialmarket?s regulation pursuant of the Sarbanes Oxley Act of 2002 (SOX). There is currentlyincomplete knowledge on the relationship between insider trading and earningsmanagement on the one hand and earnings management and firm performance on the otherin light of the recent regulatory intervention (SOX). Moreover, the relevance of politicalregulation of financial markets has not yet been thoroughly investigated. The research aims of the dissertation are: 1) To evaluate the effectiveness of financialmarket regulation (SOX) on Insider trading and Earnings management 2) To empiricallyexamine how the different techniques used to manage earnings influence firm performancein light of the recent regulatory intervention (SOX). Both tests suggest ways in whichinvestors can examine and unravel a comprehensive set of earnings management signalsand their impact on either insider trading or future firm performance. The thesis is divided into two main empirical chapters: The first main empirical chapter(chapter 4) discusses insider trading and earnings management in light of the recentregulatory intervention mandated by the SOX. The second main empirical chapter (Chapter5) discuss changes in earnings management and firm performance relationship in light ofthe recent regulatory intervention as prescribed by SOX. In an attempt to obtain acomprehensive understanding of several conceptual issues, the different techniques used tomanage earnings are employed including, discretionary accruals techniques, real earningsmanagement and the probability of financial statements distortion as measured by theBeneish M-Score. Overall, the focus is on managers of S & P 500 companies, holders ofprivate information about the firm?s prospects, preparers and senders of financial reportsand investors and analysts as receivers and users of these financial statements. Findings on the relationship between insider trading and earnings management in light ofthe recent regulatory intervention suggest that after the Sarbanes Oxley Act of 2002,managers are less likely to time their trade and boast earnings to benefit at the expense ofoutside investors. Furthermore, under stricter regulations, market participants detect andreact to insider trading and earnings management practices. Findings on the relationship between a comprehensive set of earnings management signalsand firm performance suggest that there have been greater monitoring of financialIIIstatements in the Post SOX era. When firms attempt to manage earnings during periods ofintense market regulation, investors discount this through disappointing stock returns. Overall, the results suggest that there should be broad based approach in analysingfinancial statements.
Book Synopsis Earnings Valuation and Insider Trading by : Wen Yu
Download or read book Earnings Valuation and Insider Trading written by Wen Yu and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study explores insider trading as a function of differences between managers' and the market's assessment of company earning components - specifically operating cash flows and accruals. It extends prior research by more comprehensively studying earnings components. It also builds a perspective of managers as sophisticated investors who, while engaging in earnings management, ultimately make insider trading decisions based on the divergence between their private valuation of earnings components and the market's. Thus managers may, seemingly counter-intuitively, engage in income-increasing earnings management and insider buying in the same period. Using 4,357 recent firm - years of observations, we find strong evidence that insider buying, but not selling, behavior is consistent with managerial insider trading based on a market valuation divergence of both operating cash flows and accruals, rather than on either element individually, or on managers' use of accounting discretion. We apply the methodological framework of the Mishkin (1983) test to address the hypothesis above. In particular, we assess the relations involving market pricing and characteristics of company earnings and insider trading as these relate to the fundamental idea of market valuation divergence.
Book Synopsis Investment Intelligence from Insider Trading by : H. Nejat Seyhun
Download or read book Investment Intelligence from Insider Trading written by H. Nejat Seyhun and published by MIT Press. This book was released on 2000-02-28 with total page 452 pages. Available in PDF, EPUB and Kindle. Book excerpt: Learn how to profit from information about insider trading. The term insider trading refers to the stock transactions of the officers, directors, and large shareholders of a firm. Many investors believe that corporate insiders, informed about their firms' prospects, buy and sell their own firm's stock at favorable times, reaping significant profits. Given the extra costs and risks of an active trading strategy, the key question for stock market investors is whether the publicly available insider-trading information can help them to outperform a simple passive index fund. Basing his insights on an exhaustive data set that captures information on all reported insider trading in all publicly held firms over the past twenty-one years—over one million transactions!—H. Nejat Seyhun shows how investors can use insider information to their advantage. He documents the magnitude and duration of the stock price movements following insider trading, determinants of insiders' profits, and the risks associated with imitating insider trading. He looks at the likely performance of individual firms and of the overall stock market, and compares the value of what one can learn from insider trading with commonly used measures of value such as price-earnings ratio, book-to-market ratio, and dividend yield.
