No abstract

We analyze the importance of personal attributes in explaining the performance of reported share transactions by corporate insiders. While prior literature has focused on observable firm and trade characteristics, little effort has been made to understand how individual attributes, such as skills, abilities, or personality, impact upon post-trade abnormal returns. We document that personal attributes explain up to a third of the variability in insider trading performance and dominate unobservable and observable firm and trade characteristics by a sizeable margin. Personal attributes are correlated with the insider’s year of birth, education and gender, and matter more in companies with greater information asymmetry and when outsiders are inattentive to public information. We shed also new light on the significance of executive hierarchy and regulations in explaining insider trading performance and highlight the importance of controlling for individual fixed effects in insider trading research to avoid omitted variable bias in estimated regression coefficients

We argue that insiders' decisions to trade in short windows before news announcements are likely to result from a trade-off between the incentives to capitalize on the foreknowledge of the disclosure and the risk of regulatory scrutiny and reputation loss. We provide evidence that the decision of insiders to buy is driven by this trade-off. We show that insiders strategically choose the amount of shares bought ahead of good news announcements, as they increase their purchases when the price impact of the news goes up, but the amount of shares purchased levels off as the news becomes extreme. In contrast, their sell trades are primarily influenced by the deterring effect of the regulatory and reputation risks, as the probability of their sell trades decreases significantly with the price impact of the forthcoming bad news. To further support our arguments on the importance of incentives and disincentives to trade, we show that the strategic trading is mainly observed in the most price-sensitive groups of news announcements, and is clearly pronounced for best informed executives (CEOs), and that the trading patterns change with changes in regulations, and insiders with higher reputational risk limit their trading ahead of bad news. Copyright (c) 2010 Blackwell Publishing Ltd.

This paper studies cross-sectional determinants of the exposure of U.K. firms to Brexit, an event which resulted in an unprecedented rise in political uncertainty. We find that internationalization has a moderating effect on Brexit exposure which goes beyond the pure currency translation effect and is consistent with international activities acting as a diversification mechanism for domestic risks. We also provide some indicative evidence that high-growth firms are more affected by Brexit. At the industry level, we show that Financials and firms in the consumer-facing sectors have the highest exposure to Brexit-related uncertainty. Knowledge of the variation in exposure of individual firms and sectors to political uncertainty associated with major political events can assist managers, investors and policymakers in taking remedial actions to limit its impact.