The People in Your Neighborhood: Evidence of Local Information Leakage Around Corporate Headquarters When Insiders Trade

36 Pages Posted: 3 Nov 2012

See all articles by Thomas C. Omer

Thomas C. Omer

University of Nebraska at Lincoln - School of Accountancy

Darren T. Roulstone

Ohio State University (OSU) - Fisher College of Business

Nathan Y. Sharp

Texas A&M University - Department of Accounting

Brady J. Twedt

University of Oregon - Lundquist College of Business

Date Written: November 1, 2012

Abstract

This study adds to the literature on the existence of information asymmetries in financial markets by investigating whether information leakage occurs in the local geographic area surrounding corporate headquarters at the time of nonpublic corporate events. On days when a corporation’s headquarters city is the top location for Google searches for company-specific financial information, we find that insider selling is positively associated with the volume of Google search. This result is consistent with information leakage in close proximity to corporate headquarters before news of insider selling is public. In addition, we find that insider selling is negatively associated with Google search volume when the top search location is away from corporate headquarters, consistent with insiders avoiding selling shares around public information events. We also find more negative future abnormal returns when local information search is high at the time of insider selling. Collectively, our results provide evidence consistent with a local information advantage near corporate headquarters when insiders sell their shares.

Keywords: Insider trading, information search, information leakage, Google Trends

JEL Classification: G14, G30, D82, D83, K22, M52

Suggested Citation

Omer, Thomas C. and Roulstone, Darren T. and Sharp, Nathan Y. and Twedt, Brady J., The People in Your Neighborhood: Evidence of Local Information Leakage Around Corporate Headquarters When Insiders Trade (November 1, 2012). Mays Business School Research Paper No. 2170102, Available at SSRN: https://ssrn.com/abstract=2170102 or http://dx.doi.org/10.2139/ssrn.2170102

Thomas C. Omer

University of Nebraska at Lincoln - School of Accountancy ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

Darren T. Roulstone

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

Nathan Y. Sharp (Contact Author)

Texas A&M University - Department of Accounting ( email )

4353 TAMU
College Station, TX 77843-4353
United States
979-845-0338 (Phone)

Brady J. Twedt

University of Oregon - Lundquist College of Business ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States

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