Does director trading change the information environment?

Authors

Millicent M. Chang, University of Western AustraliaFollow
Xiaolin Qian, University of Macau
Jing Yu, University of Western Australia
Yvonne See, University of Western Australia

RIS ID

119542

Publication Details

Chang, M., Qian, X., Yu, J. & See, Y. (2017). Does director trading change the information environment?. Australian Journal of Management, 42 (2), 205-229.

Abstract

Investigating ASX300 firms for the period 2002-2010, we find that the information content of director trading has a negative relationship with post-trade information asymmetry, but a positive relationship with information efficiency. These results are mainly driven by director purchases rather than their sales, and are stronger in non-executive director trading. Our results are robust to the adoption of IFRS in 2005 and the global financial crisis in 2008. These findings back the claims of insider trading proponents, by showing that director trading plays a crucial role in reducing information asymmetry and in improving information efficiency for stock market participants.