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Regulations in the pre-Sarbanes–Oxley era allowed corporate insiders considerable flexibility in strategically timing their trades and SEC filings, for example, by executing several trades and reporting them jointly after the last trade. We document that even these lax reporting requirements were frequently violated and that the strategic timing of trades and reports was common. Event study abnormal re-turns are larger after reports of strategic insider trades than after reports of otherwise similar nonstrategic trades. Our results also imply that delayed reporting is detrimental to market efficiency and lend strong support to the more stringent trade reporting requirements established by the Sarbanes–Oxley Act. JEL Classification: G14, G30, G32 Keywords: Insider Trading , Directors' Dealings , Corporate Governance , Market Efficiency
We study how the informativeness of stock prices changes with the presence of high-frequency trading (HFT). Our estimate is based on the staggered start of HFT participation in a panel of international exchanges. With HFT presence, market prices are a less reliable predictor of future cash flows and investment, even more so for longer horizons. Further, firm-level idiosyncratic volatility decreases, and the holdings and trades by institutional investors deviate less from the market-capitalization weighted portfolio as a benchmark. Our results document that the informativeness of prices decreases subsequent to the start of HFT. These findings are consistent with theoretical models of HFTs' ability to anticipate informed order flow, resulting in decreased incentives to acquire fundamental information.