Management Earnings Forecasts and Insider Trading

Abstract

Abstract: As one of the mechanisms to reduce the information asymmetry, management earnings forecast is of great significance to investors and management. This paper studies the relationship between insider trading and management earnings forecasts. The results show that insider sell trading has a significant positive relationship with management earnings forecast when companies disclose the good news earning forecast, which conforms to the information hierarchy hypothesis. Furthermore, the significant relationship between insider sell trading and management earnings forecast is centralized in the board members sub-sample. We further finds that the effective mechanism of external corporate governance weakens insider selling.

Key words: management earnings forecasts, insider trading, board of directors, voluntary disclosure

Zhou Donghua, Zhao Yujie, Chen Minjie. Management Earnings Forecasts and Insider Trading[J]. Management Review, 2021, 33(1): 254-268.

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