Legal Corporate Insider Trading And The Price Impact Of Private Information

This paper examines the information value of corporate insider trading disclosures for a sample of 2,108 public traded companies located in seven (continental) European countries. Their results indicate that insiders selling (buying) stocks in their own company reveal negative (positive) information about the intrinsic firm value. This general observation is mainly driven by German law countries and declines over time. In addition, stock prices of smaller companies react stronger to insider transactions. Furthermore, insiders tend to time their trades, selling shares after stock price increases and buying shares after stock price decreases.