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Freie Universität Bozen

Standort Room BZ E4.23, Universitätsplatz 1 - Piazza Università, 1, 39100 Bozen-Bolzano

Dienststellen Press and Events

Kontakt Claudia Resch
SchoolofEconomics@unibz.it

19 Jun 2018 15:00-16:00

Disclosure of Financial Statement Line Items and Opportunistic Insider Trading

Paul Zarowin, Leonard N. Stern School of Business

Standort Room BZ E4.23, Universitätsplatz 1 - Piazza Università, 1, 39100 Bozen-Bolzano

Dienststellen Press and Events

Kontakt Claudia Resch
SchoolofEconomics@unibz.it

This paper examines the relation between voluntary disclosure of financial statement line items accompanying, and insider trading around, quarterly earnings announcements. We show that investors’ reaction to earnings news is heightened by the level of financial statement line items disclosed during earnings announcements. We also find that managers, being aware of investors’ attentionon earnings announcements, disclose more financial statement line items along with earnings news, in order to hype their stock and profit more from their insider trading. Our results are more pronounced for CEO/CFO trades than for other trades. Overall, our results are most consistent with managers’ opportunistically disclosing line items to exploit the short-term return effectto their private benefit. This paper integrates three disparate phenomena around earnings announcements – stock returns,insider trading, and voluntary disclosures – into pieces of one mosaic.