Publication Type
Journal Article
Version
publishedVersion
Publication Date
11-2015
Abstract
We study how the presence of short sellers affects the incentives of the insiders to trade on negative information. We show it induces insiders to sell more (shares from their existing stakes) and trade faster to preempt the potential competition from short sellers. An experiment and instrumental variable analysis confirm this causal relationship. The effects are stronger for "opportunistic" (i.e., more informed) insider trades and when short sellers' attention is high. Return predictability of insider sales only occurs in stocks with high short-selling potential, suggesting that short sellers indirectly enhance the speed of information dissemination by accelerating trading by insiders. (C) 2015 Elsevier B.V. All rights reserved.
Keywords
Short selling, Insider trading, Informed trader, Market efficiency
Discipline
Finance | Finance and Financial Management
Research Areas
Finance
Publication
Journal of Financial Economics
Volume
118
Issue
2
First Page
268
Last Page
288
ISSN
0304-405X
Identifier
10.1016/j.jfineco.2015.08.004
Publisher
Elsevier
Citation
MASSA, Massimo; QIAN, Wenlan; XU, Weibiao; and ZHANG, Hong.
Competition of the informed: Does the presence of short sellers affect insider selling?. (2015). Journal of Financial Economics. 118, (2), 268-288.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7050
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
External URL
https://doi.org/10.1016/j.jfineco.2015.08.004