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Insider response to credit watch placements

Ken Yook (The John Hopkins University)
William C. Hudson (St Cloud State University)
Steven Cole (University of North Texas)
Partha Gangopadhyay (St Cloud State University)

Managerial Finance

ISSN: 0307-4358

Article publication date: 1 August 2000



An examination of insider trading before and after the announcement of Credit Watch placements sheds new light on the study of both bond rating changes and insider trading. This paper utilizes Credit Watch placements classified by 11 indentifiable trigger events for the years 1981‐1990. We find significant insider purchases before positive implication placements, but no sales before negative implication placements. Among individual trigger events, we observe significant insider purchases before and after placements due to improved operating performance, bidding on a firm with a higher debt rating and firms increasing their debt‐to‐equity ratios. Significant insider purchases are found before placements due to purchasing assets. Significant insider sales are found before and after placements due to poor operating performance.



Yook, K., Hudson, W.C., Cole, S. and Gangopadhyay, P. (2000), "Insider response to credit watch placements", Managerial Finance, Vol. 26 No. 8, pp. 41-53.




Copyright © 2000, MCB UP Limited

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