Corporate bankruptcy and insider trading

A study documents significant sales by the insiders of firms filing bankruptcy petitions prior to the filing date. It is found that selling is more intense for top executives and officers and that insiders in general systematically sell stock before prices fall and buy stock after prices have fallen...

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Bibliographic Details
Published inThe Journal of business (Chicago, Ill.) Vol. 70; no. 2; p. 189
Main Authors Seyhun, H Nejat, Machael Bradley
Format Journal Article
LanguageEnglish
Published Chicago University of Chicago, acting through its Press 01.04.1997
Subjects
Bankruptcy
Bankruptcy reorganization
Capital losses
Incentives
Insider trading
Inventory
Prices
Proxy statements
Public policy
Sales
Shareholders wealth
Stock prices
Stockholders
Studies
Trends
Wages & salaries
United States > US
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Summary:A study documents significant sales by the insiders of firms filing bankruptcy petitions prior to the filing date. It is found that selling is more intense for top executives and officers and that insiders in general systematically sell stock before prices fall and buy stock after prices have fallen. Although this trading pattern may simply reflect an implicit compensation arrangement between insiders and stockholders, the significant sell-off does raise potential questions regarding managements' incentives to maximize shareholder wealth through the Chapter 11 process.
ISSN:0021-9398
1537-5374
DOI:10.1086/209715