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Informative content of insider purchases: evidence from the financial crisis

Aydin Ozkan (Hull University Business School, University of Hull, Hull, UK)
Agnieszka Trzeciakiewicz (Hull University Business School, University of Hull, Hull, UK)

Review of Behavioral Finance

ISSN: 1940-5979

Article publication date: 2 September 2014




The purpose of this paper is to investigate the impact of insider trading on subsequent stock returns in the UK, with a specific focus on the impact of the global financial crisis of 2007-2008 on the relation between CEO and CFO stock purchases and returns.


The empirical analysis uses 10,230 purchases executed in 679 UK firms by 1,477 directors during the period from 2000 to 2010. Subsequent market-adjusted stock returns are regressed on a set of firm-specific accounting, market and corporate governance variables as well as the characteristics of CEOs and CFOs. Additionally, the analysis distinguishes between the opportunistic and routine trades.


The findings reveal that the position of the trading director and the nature of their trades are important in determining the impact on returns of insider trades. In particular, CEO purchases are on the whole more informative than CFO purchases and opportunistic purchases. The trades in the post-crisis period have a greater impact on subsequent stock returns.

Research limitations/implications

The empirical analysis is limited to the trades made by two executives. Future research should consider inside trades by all directors and distinguish between executive and non-executive directors. Also, a behavioral measure should be developed to test if the financial crisis affected the trading behavior of directors and whether directors use insider trading strategically to signal information to the market.

Practical implications

The impact of directors’ dealings on stock returns is not homogeneous. Financial analysts and investors should pay more attention to different types of trades and the identity of trading director.


This paper, to the authors’ knowledge, provides the first attempt that combines in the same framework the identity and personal attributes of trading executive directors, firm-level corporate governance features, the nature of purchase transactions and the trading period characteristics. Furthermore the empirical analysis is carried out during a period that also covers the recent global financial crisis period and its immediate aftermath.



JEL Classifications — G30, G32, G39

The authors thank John Doukas, Jana Fidrmuc, Chrisostomos Florackis, Alper Kara, Oguzhan Karakas, Menelaos Karanasos, Meziane Lasfer, Balbinder Singh and participants of the 2013 European Financial Management Association Meeting, the 20th Annual Conference of the Multinational Finance Society and the 4th International International Finance and Banking Society Conference for valuable comments. The authors also thank Ozgur Ozdemir for providing them with some of the trading and corporate governance data. Any remaining errors are the authors.


Ozkan, A. and Trzeciakiewicz, A. (2014), "Informative content of insider purchases: evidence from the financial crisis", Review of Behavioral Finance, Vol. 6 No. 1, pp. 26-45.



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Copyright © 2014, Emerald Group Publishing Limited

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