When and how are rule 10b5-1 plans used for insider stock sales?

Eliezer M. Fich; Robert Parrino; Anh L. Tran

doi:10.1016/j.jfineco.2023.04.009

When and how are rule 10b5-1 plans used for insider stock sales?

Eliezer M. Fich, Robert Parrino Anh L. Tran

Journal of financial economics, v 149(1), pp 1-26

Jul 2023

: https://doi.org/10.1016/j.jfineco.2023.04.009

(1)

url

https://openaccess.city.ac.uk/id/eprint/30049/1/Fich%2C%20Parrino%2C%20and%20Tran%20-%2031%20January%202023%20deposit.pdf

Accepted (AM)

10b5-1 plan

Corporate governance

Insider trading

SEC Rule10b5-1 plans are intended to limit the ability of insiders to trade opportunistically. We study insider stock sales by CEOs both under and outside of these plans. While both groups exhibit opportunism, this behavior is more limited in plan sales and non-plan sales in well-governed firms. Furthermore, opportunism in plan sales is greater for transactions representing a larger fraction of the CEO's firm-related wealth. CEOs can circumvent the intent of Rule 10b5-1 by exercising their discretion over financial reporting and real earnings management and appear to benefit from material nonpublic information by selectively cancelling plans or using limit orders.

: When and how are rule 10b5-1 plans used for insider stock sales?
: Eliezer M. Fich - Drexel University
Robert Parrino - The University of Texas at Austin
Anh L. Tran - Bayes Business School, City, University of London, 106 Bunhill Row, London EC1Y 8TZ, UK
: Journal of financial economics, v 149(1), pp 1-26
: Elsevier
: Journal article
: English
: Finance
: WOS:000991223000001
: 2-s2.0-85153628023
: 991020542327404721

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