Timing and information content of insider trades: Before and after the Sarbanes-Oxley Act of 2002

This paper examines the information content of Form 4 filings of insider trades under the more timely disclosure regime introduced by Section 403 of the Sarbanes-Oxley Act of 2002 (SOX). Abnormal returns and trading volumes around filings of insider purchases are significantly greater after than before SOX. The increase in returns around post-SOX filings of insider purchases is comparable to the amount of news that used to leak prior to pre-SOX filings. In the case of insider sales, abnormal trading volumes around their filings are also greater post-SOX, but stock returns are not more negative. Further analysis identifies two factors contributing to the difference between pre- and post-SOX sale returns: a decrease in insiders' propensity to time their sales shortly ahead of bad news after SOX and the greater dispersion of filings over time compared to before SOX.