Insider Trading Around Stock Split Announcements

Abstract

This research examines the trading behavior and motives of corporate insiders around announcements of firms' stock splits. Our empirical analyses document significant increases in insider sales prior to the announcement. Further, pre-announcement insider sales are found to be positively related to pre-announcement-period abnormal returns. These findings suggest that insider trading before stock split announcements is motivated mainly by portfolio diversification needs rather than by the information content of the announcements.