Insider Trading, The Nature Of News And The Selection Of Management Forecast Precision

There are many researches about insiders trading and management earnings forecast in the academicworld. However, most of the studies separate them from each and few studies focus on the relationshipbetween insiders trading and the strategic disclosure of information. Unlike these researches, my studychoose the listed firms that issue earnings forecasts during2011-2012as samples, and I first study therelationship between management forecast precision and the nature of news. Based on the result, Iintroduce the insiders trading data, matching them with the other data, and then I study whether theinsiders serve for themselves by manipulate the forecast precision based on the nature of news.The results show that: First, the precision change according to the nature of news, good news is moreprecise while bad news is less precise. Second, the insiders indeed have incentives to serve for themselves.Compared with management forecasts not followed by insiders, the relationship between managementforecast precision and the nature of news is more positive for those followed by insider sales and lesspositive for those followed by insider purchase. These results confirm my hypothesis that insidersstrategically select the level of precision to affect the market reaction to the forecasts, as a result, their trading gainsincrease.