Director Networks and Informed Traders

Sophisticated traders can profit from material information by trading on it ahead of public releases. This makes corporate directors, who frequently have access to this kind of knowledge, a potential information source for professional traders. And though federal law forbids directors’ sharing of insider information with traders, that information can and does leak out. In our article, Director Networks and Informed Traders, forthcoming in the Journal of Accounting and Economics, we document that these traders generate greater profits when trading stocks of firms with more connected boards. How does sensitive information reach traders? In our paper we discuss inadvertent information leakage, deliberate sharing of sensitive information, and ‘mosaic’ information gathering as possible transmission channels.

filed under: Uncategorised

0 thoughts on “Director Networks and Informed Traders”

Comments are closed.