Get access

The Reaction of Investors and Stock Prices to Insider Trading




    Search for more papers by this author
    • Cornell is from the University of California, Los Angeles, and Sirri is from the Harvard Business School. The authors would like to thank Walter Suhre and Anheuser-Busch for allowing us to make use of the insider trading data. Larry Harris graciously provided the Fitch data while he was visiting the New York Stock Exchange. Erik Sirri acknowledges financial support from the HBS Division of Research. We acknowledge the helpful comments and suggestions of Dan Asquith, Jennifer Bethel, Bob Comment, Al Fansome, Bruno Gerard, Stuart Gilson, Larry Harris, Michael Jensen, Josh Lerner, David Meerschwam, Lisa Meulbroek, André Perold, Richard Ruback, Catherine Shenoy, Andrei Shleifer, Sheridan Titman, Peter Tufano, Ivo Welch, Bill Wilhelm, an anonymous referee, and the seminar participants at Harvard Business School and UCLA.


Trading by corporate insiders and their tippees is analyzed in Anheuser-Busch's 1982 tender offer for Campbell Taggart. Court records that identify insider transactions are used to disentangle the individual insider trades from liquidity trades. Consistent with previous studies, insider trading was found to have had a significant impact on the price' of Campbell Taggart. However, the impact of informed trading on the market is complicated. Trading volume net of insider purchases rose. Contrary to the broad implications of adverse selection models, Campbell Taggart's liquidity improved when the insiders were active in the market, and the insiders received superior execution for their orders.