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When and How Are Rule 10b5-1 Plans Used for Insider Stock Sales?

Fich, E. M., Parrino, R. & Tran, A. ORCID: 0000-0001-7090-8063 (2023). When and How Are Rule 10b5-1 Plans Used for Insider Stock Sales?. Journal of Financial Economics, 149(1), pp. 1-26. doi: 10.1016/j.jfineco.2023.04.009


SEC Rule10b5-1 plans are intended to limit the ability of insiders to trade opportunistically. We study insider stock sales by CEOs both under and outside of these plans. While both groups exhibit opportunism, this behavior is more limited in plan sales and non-plan sales in well-governed firms. Furthermore, opportunism in plan sales is greater for transactions representing a larger fraction of the CEO’s firm-related wealth. CEOs can circumvent the intent of Rule 10b5-1 by exercising their discretion over financial reporting and real earnings management and appear to benefit from material nonpublic information by selectively cancelling plans or using limit orders.

Publication Type: Article
Additional Information: © 2023. This manuscript version is made available under the CC-BY-NC-ND 4.0 license
Publisher Keywords: Insider trading, 10b5-1 plan, Corporate governance
Subjects: H Social Sciences > HJ Public Finance
Departments: Bayes Business School > Finance
[thumbnail of Fich, Parrino, and Tran - 31 January 2023 deposit.pdf] Text - Accepted Version
This document is not freely accessible until 27 April 2025 due to copyright restrictions.
Available under License Creative Commons Attribution Non-commercial No Derivatives.


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