Arif, Salman
[Verfasser:in]
;
Kepler, John D.
[Sonstige Person, Familie und Körperschaft];
Schroeder, Joseph H.
[Sonstige Person, Familie und Körperschaft];
Taylor, Daniel J.
[Sonstige Person, Familie und Körperschaft]
Audit Process, Private Information, and Insider Trading
Erschienen in:Kelley School of Business Research Paper ; No. 18-85
Umfang:
1 Online-Ressource (51 p)
Sprache:
Englisch
DOI:
10.2139/ssrn.3264424
Identifikator:
Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments August 5, 2020 erstellt
Beschreibung:
While the shareholder benefits of audits are well documented, evidence on whether audits can facilitate opportunistic behavior by corporate insiders is scarce. In this paper, we examine whether the audit process facilitates one particular form of opportunism: informed trading by corporate insiders. We focus our analysis on insider trading around the audit report date. We find an increase in trading around the audit report date and that the increase is abnormally large for firms that subsequently report modified opinions. Abnormal increase in trading is concentrated among officers and non-audit committee independent directors, and most pronounced in first-time modified opinions and modified opinions in years where financial results are subsequently restated. These trades are highly opportunistic: they predict restatements, and as a consequence, avoid significant losses. Collectively, our findings provide novel evidence that insiders appear to exploit private information about the audit process––a process ostensibly designed to protect shareholders––for opportunistic gain