Insider trading and future stock returns in firms with concentrated ownership levels

Dimitris K. Chronopoulos, David G. McMillan, Fotios Papadimitriou* (Corresponding Author), Manouchehr Tavakoli

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

5 Citations (Scopus)
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We investigate the relationship between insider trading and stock returns in firms with concentrated ownership. To this end, we employ data from East Asian countries which span the period January 2003 to May 2012. Consistent with the previous literature, we find a significantly negative relation between the selling activity of insiders and stock returns. However, contrary to studies which focus on highly developed markets, we find that the buying activity of insiders is also inversely related to future stock returns. Our analysis shows that top directors with higher ownership levels drive this result, suggesting that the trading activity of insiders is not always associated with profit-making motives and can be explained by their level of ownership. Furthermore, we demonstrate that a trading strategy which focuses solely on purchases made by top directors with high ownership levels yields negative returns. The paper has important implications for outside investors who mimic the trading activity of insiders with the aim to realise profits.
Original languageEnglish
Pages (from-to)139-154
Number of pages15
JournalEuropean Journal of Finance
Issue number2
Early online date22 Jun 2018
Publication statusPublished - 2019


  • insider trading
  • stock returns
  • economic value
  • trading strategies
  • Insider trading


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