Strategic trading by insiders in the presence of institutional investors

We examine how competition to trade on information with institutional traders affects insider trading. We find insiders complete their trades quicker when trading on the same side as in-stitutions, and this effect is more pronounced when insiders are more informed. These findings support information-based models, suggesting that insiders accelerate their trading as institu-tional traders are likely to become privy to the private information and compete with them. We identify two possible channels by which institutional investors acquire private information: when insiders and institutional traders share the same broker, and when firms' headquarters are in the same city as institutional traders.