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The information content of managerial insider trading: evidence from analyst forecasts

Omar Esqueda (Accounting, Finance and Economics, Tarleton State University, Stephenville, Texas, USA)
Thanh Ngo (Finance, East Carolina University, Greenville, North Carolina, USA)
Daphne Wang (Finance, Jacksonville University, Jacksonville, Florida, USA)

Asian Review of Accounting

ISSN: 1321-7348

Article publication date: 29 June 2021

Issue publication date: 13 August 2021




This paper examines the effect of managerial insider trading on analyst forecast accuracy, dispersion and bias. Specifically, the authors test whether insider-trading information is positively associated with the precision of earnings forecasts. In addition, this relationship between Regulation Fair Disclosure (FD) and the Galleon insider trading case is examined.


Pooled ordinary least squares (Pooled OLS) rregressions with year-fixed effects, firm-fixed effects, and firm-level clustered standard errors are used. Our proxies for forecast precision are regressed on alternative measures of insider trading activities and a vector of control variables.


Insider-trading information is positively associated with the precision of earnings forecasts. Analysts provide better forecast accuracy, less forecast dispersion and lower forecast bias among firms with insider trading in the six months leading to the forecast issues. In addition, bullish (bearish) insider trades are associated with increased (decreased) forecast bias. Insider trading information complements analysts' independent opinion and increases the precision of their forecast.

Practical implications

Regulators may pursue rules that promote the rapid disclosure of managerial insider trades, particularly given the increasing availability of Internet tools. Securities regulators may attempt to increase transparency and enhance the reporting procedures of corporate insiders, for example, using Internet sources with direct release to the public to ensure more timely information dissemination.


The authors document a positive association between earnings forecast precision and managerial insider trading up to six months prior to the forecast issue. This relationship is stronger after the Securities and Exchange Commission (SEC) prohibited the selective disclosure of material nonpublic information through Regulation FD. In addition, the association between insider trading and forecast accuracy has weakened after the Galleon insider trading case.



This manuscript received partial support from the Office of Faculty Research at Tarleton State University.


Esqueda, O., Ngo, T. and Wang, D. (2021), "The information content of managerial insider trading: evidence from analyst forecasts", Asian Review of Accounting, Vol. 29 No. 3, pp. 332-361.



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