Insider trading returns and dividend signals

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

10 Scopus Citations
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Author(s)

  • Louis T.W. Cheng
  • Wallace N. Davidson
  • T. Y. Leung

Related Research Unit(s)

Detail(s)

Original languageEnglish
Pages (from-to)421-429
Journal / PublicationInternational Review of Economics and Finance
Volume20
Issue number3
Publication statusPublished - Jun 2011

Abstract

The literature shows that insider trading activities and dividends contain information content and serve as signals to firm value. If insider return is a proxy for information asymmetry, we should expect a positive relation between dividends and insider returns. Using a sample of unambiguous (good and bad) news concerning earnings and dividend announcements from Hong Kong firms, we show that information asymmetry is stronger for bad news firms with insider sales than good news firms with insider purchases. In addition, we improve the methodology of Khang and King [Khang, K., & King, T. H. D. (2006). Does dividend policy relate to cross-sectional variation in information asymmetry? Evidence from returns to insider trades. Financial Management, 35, 71-94] and provide evidence that dividend is a credible signal for measuring information asymmetry. © 2010 Elsevier Inc.

Research Area(s)

  • Dividends, Earnings, Information asymmetry, Insider trading

Citation Format(s)

Insider trading returns and dividend signals. / Cheng, Louis T.W.; Davidson, Wallace N.; Leung, T. Y.

In: International Review of Economics and Finance, Vol. 20, No. 3, 06.2011, p. 421-429.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review