NDLI: Anticipating the Financial Crisis: Evidence from Insider Trading in Banks

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Anticipating the Financial Crisis: Evidence from Insider Trading in Banks

Content Provider	Scilit
Author	Akin, Ozlem Marin, Jose M.
Copyright Year	2016
Description	Journal: SSRN Electronic Journal Banking crises are recurrent phenomena, often induced by ex-ante excessive bank risk-taking, which may be due to behavioral reasons (over-optimistic banks neglecting risks) and to agency problems between bank shareholders with debt-holders and taxpayers (banks understand high risk-taking). We test whether US banks' stock returns in the 2007-08 crisis are related to bank insiders' sale of their own bank shares in the period prior to 2006:Q2 (the peak and reversal in real estate prices). We find that top-five executives' ex-ante sale of shares predicts the cross-section of banks returns during the crisis; interestingly, effects are insignificant for independent directors' and other officers' sale of shares. Moreover, the top-five executives' significant impact is stronger for banks with higher ex-ante exposure to the real estate bubble, where an increase of one standard deviation of insider sales is associated with a 13.33 percentage point drop in stock returns during the crisis period. The informational content of bank insider trading before the crisis suggests that insiders understood the risk-taking in their banks, which has important implications for theory, public policy and the understanding of crises.
Related Links	http://repositori.upf.edu/bitstream/10230/26837/1/1524.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=2779048
ISSN	10914358
e-ISSN	15565068
DOI	10.2139/ssrn.2779048
Journal	SSRN Electronic Journal
Language	English
Publisher	Elsevier BV
Publisher Date	2016-05-12
Access Restriction	Open
Subject Keyword	Journal: SSRN Electronic Journal Agency Problems in Firms
Content Type	Text
Resource Type	Article
Subject	Public Health, Environmental and Occupational Health Psychiatry and Mental Health

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