Publication Type
Journal Article
Version
submittedVersion
Publication Date
9-2021
Abstract
We identify the broker each corporate insider trades through, and find that analysts and mutual fund managers affiliated with such “inside brokers” have a substantial information advantage on the insider’s firm. Affiliated analysts issue more accurate earnings forecasts, and affiliated mutual funds trade the insider’s stock more profitably than their peers, following insider trades through their brokerage. Notably, this advantage persists well after these insider trades are publicly disclosed. Our results challenge the prevalent perception that information asymmetry arising from insider trading is acute only before trade disclosure, and suggest that brokers facilitating these trades are in a position to exploit this asymmetry.
Keywords
Insiders, Brokers, Analysts, Mutual Funds, Information Transmission
Discipline
Corporate Finance | Portfolio and Security Analysis
Research Areas
Finance
Publication
Journal of Financial Economics
Volume
141
Issue
3
First Page
1096
Last Page
1118
ISSN
0304-405X
Identifier
10.1016/j.jfineco.2021.05.029
Publisher
Elsevier
Citation
LI, Frank Weikai; MUKHERJEE, Abhiroop; and SEN, Rik.
Inside brokers. (2021). Journal of Financial Economics. 141, (3), 1096-1118.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/5324
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.jfineco.2021.05.029