Insider trading and the legal expertise of corporate executives
نویسندگان
چکیده
We investigate if prior professional legal education either restrains or increases the extent to which the insider trades of company executives and directors are informed. We show that lawyer-insiders earn significantly lower abnormal returns than non-lawyers when they purchase their own company’s shares. Purchases of own company stock by lawyer-insiders are associated with lower future earnings surprises and firm profitability than those made by non-lawyer-insiders, and are more muted following months with high levels of SEC enforcement activity. Our results suggest that insiders with professional legal education may be more conservative in exploiting private information when making insider trades.
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