Using a comprehensive database of headlines about individual companies, I examine monthly returns following public news. I compare them to stocks with similar returns, but no identifiable public news. There is a di#erence between the two sets. I find strong drift after bad news. Investors seem to react slowly to this information. I also find reversal after extreme price movements unaccompanied by public news. The separate patterns appear even after adjustments for risk exposure and other e#ects. They are, however, mainly seen in smaller, more illiquid stocks. These findings support some integrated theories of investor over- and underreaction.

Eric Sirri, Andrei Shleifer, and an anonymous referee for helpful comments. We acknowledge

This paper examines whether insiders use private information to time the exercises of their executive stock options. Before May 1991, insiders had to hold the stock acquired through option exercise for six months. Exercises from that regime precede signi¯cantly positive abnormal stock performance, suggesting the use of inside information to time exercises. By contrast, we ¯nd little evidence of such timing since insiders have been able to sell acquired shares immediately. Now, such timing should show up as negative abnormal stock returns after option exercise. However, we ¯nd negative stock performance only after exercises by The debate about the value of executive stock options has focused on features of these options that make them worth less than ordinary options, such as their forfeitability and nontransferability. However, other aspects of these options might enhance their value to the executive.

We compare the trading performance of independent directors and other officers of the firm. We find that independent directors earn positive and substantial abnormal returns when they purchase their company stock, and that the difference with the same firm’s officers is relatively small at most horizons. The results are robust to controlling for firm fixed effects and to using a variety of alternative specifications. Executive officers and independent directors make higher returns in firms with the weakest governance and the gap between these two groups widens in such firms. Independent directors who sit on the audit committee earn higher return than other independent directors at the same firm. Finally, independent directors earn significantly higher returns than the market when they sell the company stock in a window before bad news and around earnings restatements.

We show that the agency theory of overvalued equity (see Jensen, 2005, and others) rather than investors ’ fixation on accruals explains the accrual anomaly, i.e., abnormal returns to an accrual trading strategy (see Sloan, 1996). Under the agency theory of overvalued equity, managers of overvalued firms are likely to manage their firms ’ accruals upwards to prolong the overvaluation. Overvaluation, however, cannot be sustained indefinitely and we expect price reversals for high accrual firms. In contrast, undervalued firms do not face incentives to report low accruals. Therefore, we predict and find an asymmetric relation between accruals and both prior and subsequent returns. In addition, consistent with the predictions of the agency theory of overvalued equity, we find high, but not low, accrual firms ’ investment-financing decisions and insider trading activity are distorted. Overall, return behavior, investment-financing decisions, and insider trading activity are all consistent with the agency theory of overvalued equity and Agency Theory of Overvalued Equity as an Explanation for the Accrual Anomaly

We study put option sales undertaken by corporations during their repurchase programs. Put sales ’ main theoretical motivation is market timing, providing an excellent framework for studying whether security issues reflect managers ’ ability to identify mispricing. Our evidence is that these bets reflect timing ability, and are not simply a result of overconfidence. In the 100 days following put option issues, there is roughly a 5 % abnormal stock price return, and the abnormal return is concentrated around the first earnings release date following put option sales. Longer term effects are generally not detected. Put sales also appear to reflect successful bets on the direction of stock price volatility. 2 1

In this paper, I investigate the magnitude, determinants, and consequences of equity grants to target firm CEOs prior to acquisitions. Median equity grants to the target CEO are generally largest in the year before the acquisition, both relative to prior years and to a control sample with similar size, growth opportunities, and industry association. There is some evidence that equity awards are used to compensate the CEO for his expected loss from selling the firm, but no evidence that the CEO uses his power to obtain excessive equity. Equity grants are positively related to acquisition premiums for target firms that do not initiate the sale. Overall, the evidence suggests that equity awards to the target CEO reflect the CEO’s and board’s information and incentives relating to the upcoming acquisition consistent with shareholder wealth maximization within the market for corporate control. I appreciate the helpful comments and suggestions provided by my dissertation committee – Dan Dhaliwal (chair),

Abstract: We analyze transactions by corporate insiders in Germany, a country with a bankdominated financial system. Insider purchases [sales] are associated with positive [negative] cumulative abnormal returns (CARs). We relate the magnitude of the CARs to the position of the insider within the firm and the ownership structure of the firm. Insider sales in firms with dispersed ownership structure have a larger price impact. Inconsistent with the informational hierarchy hypothesis, the position of the insider within the firm does not have a discernible impact on the magnitude of the CARs. We also document that insider trades that occur prior to an earnings announcement have a larger price impact. This result provides a rationale for the UK regulation that prohibits insiders from trading prior to earnings announcements. JEL classification:

We are grateful to participants at UWA's Accounting and Finance Workshop Series for their valuable comments. Finally we would also like to take this opportunity to acknowledge SIRCA's support in providing access to core elements of data. a

This paper examines the information content of insider trade Form 4 filings under the more timely disclosure regime introduced by Section 403 of the Sarbanes-Oxley Act of 2002 (SOX). Abnormal returns and trading volumes around filings of insider purchases are significantly greater after than before SOX. The increase in returns around post-SOX filings of insider purchases is comparable to the amount of news that used to leak prior to pre-SOX filings. In the case of insider sales, abnormal trading volumes around their filings are also greater post-SOX, but stock returns are not more negative. Further analysis identifies two factors contributing to the difference between pre- and post-SOX sale returns: a decrease in insiders ’ propensity to time their sales shortly ahead of bad news after SOX and the greater dispersion of filings over time compared to before SOX.