Timing information, SEC enforcement intensity and illegal insider trading

This paper explores the difference between illegal insider trading around scheduled and unscheduled corporate announcements. Moreover, this paper also examines whether the underlying option has impacted on trading patterns of illegal insider trading around corporate announcements. I find that the negative relationship between price run-ups and measures of SEC effort before unscheduled announcements is stronger than before scheduled announcements. Keeping other variables the same, the relationship is stronger for stocks without traded options than for stocks with options listed. The results between illegal insider volume and measures of SEC effort are similar to those between price run-ups and measures of SEC effort. The abnormal returns and illegal insider volume do not decrease by category of defendant in the proposed order, which does not support the information hierarchy hypothesis.