Publication Type

Working Paper

Publication Date

12-2014

Abstract

Prior evidence on pre-bankruptcy-filing informed trade is mixed. The inconclusive findings might result from the sole focus on stock trading. We reassess the presence of pre-filing informed and insider trades by examining the information content of options trading before bankruptcy announcements. We find that bankruptcy filing returns are not significantly related to pre-filing insider stock trading. However, filing returns are significantly negatively related to pre-filing insider and informed options trading. The informational content of options trading reduces with options illiquidity and the amount of information impounded into pre-filing stock prices.

Keywords

Bankruptcy, O/S, Informed Options Trading, Insider Trading

Discipline

Business | Corporate Finance | Finance and Financial Management

Research Areas

Finance

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