Insider Trading Preceding Goodwill Impairments

The authors investigate whether insiders strategically sell shares prior to the disclosure of goodwill impairment losses. They provide evidence that insiders of goodwill impairment firms engage in abnormal selling of their shares quarters prior to the announcement of such losses. In addition, of firms recording goodwill impairments, they provide evidence that those firms with insiders selling prior to the announcement of the loss face significantly more negative abnormal returns. The findings are robust to subsample analysis examining firms reporting goodwill impairments and having low quality information environments.