Innovation and Insider Trading

Ibrahim Bostan

Document Type

Article

Source of Publication

SSRN Electronic Journal

Publication Date

1-1-2016

Abstract

The study finds that insiders' purchases in large firms precede the patent applications for innovations. US publicly held large firms increase their innovation quality by 25% subsequent to the share purchase of top insiders, as measured by non-self citations received per patent applied. The average cumulative abnormal returns of insiders on their purchases prior to the important patent applications are economically large and significant especially in the long run. The use of private information by insiders seems to be less prevalent in firms with better corporate governance. Firm innovation quality also deteriorates after insiders sell their share in the company

ISSN

1556-5068

Publisher

Elsevier BV

Disciplines

Business

Indexed in Scopus

no

Open Access

yes

Open Access Type

Green: A manuscript of this publication is openly available in a repository

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