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Jeopardy, non-public information, and insider trading around SEC 10-K and 10-Q filings

Steven Huddart, Bin Ke, and Charles Shi

Evidence contrasting U.S. insider trades in high- and low-jeopardy periods and across firms at high and low risk for 10b-5 litigation indicates that insiders condition their trades on foreknowledge of price-relevant public disclosures, but avoid profitable trades when the jeopardy associated with such trades is high, such as immediately before earnings announcements. Insiders avoid profitable trades before quarterly earnings are announced and sell (buy) after good (bad) news earnings announcements. Insiders trade most heavily after earnings announcements and profit from foreknowledge of price-relevant information in the forthcoming Form 10-K or 10-Q filing.

JEL Classification: J33 K22 M12

Keywords: accounting standards, government regulation, insider trading, litigation risk, stock-based compensation

Journal of Accounting & Economics. Volume 43, No. 1 (March 2007) Pages 3-36

Download the published paper from

Download the June, 2006 prepublication version of the paper from SSRN.

Steven Huddart
Smeal College of Business, Penn State University, University Park, PA 16802-3603 USA
(814) 863-0048
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