Informed options trading prior to bankruptcy filings

Author

LI Ge, University of Hong Kong
Jianfeng HU, Singapore Management UniversityFollow
Mark Humphery-Jenner, University of New South Wales
Tse-Chun LIN, University of Hong Kong

Publication Type

Working Paper

Version

publishedVersion

Publication Date

5-2019

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

First Page

1

Last Page

47

Identifier

10.2139/ssrn.2302888

Publisher

SSRN

Citation

Ge, LI; HU, Jianfeng; Humphery-Jenner, Mark; and LIN, Tse-Chun. Informed options trading prior to bankruptcy filings. (2019). 1-47.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/4517

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/10.2139/ssrn.2302888