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Directors’ share dealings and corporate insolvencies: evidence from the UK

Ozkan, Aydin; Poletti-Hughes, Jannine; Trzeciakiewicz, Agnieszka


Aydin Ozkan

Jannine Poletti-Hughes

Agnieszka Trzeciakiewicz


This paper investigates the relation between insider trading and the likelihood of insolvency with a specific focus on the directors’ sale and purchase transactions preceding insolvency. We use a unique data set on directors’ dealings in 474 non-financial UK firms, of which 117 filed for insolvency, over the period 2000–2010. We show that the directors of insolvent firms increase their purchase transactions significantly as the insolvency approaches. The results also reveal a significant relation between three different measures of insider trading activity and the likelihood of insolvency, which is observed to be positive only during the last six-month trading period. The relation is negative for the earlier trading periods. While the earlier purchase transactions appear to be motivated by superior information held by insiders, the purchase trades closer to the insolvency date are possibly initiated by directors’ motives to influence the market's perception of the firm in an attempt to avert or delay insolvency.


Ozkan, A., Poletti-Hughes, J., & Trzeciakiewicz, A. (2017). Directors’ share dealings and corporate insolvencies: evidence from the UK. The European journal of finance, 23(5), 427-455.

Journal Article Type Article
Acceptance Date Apr 4, 2015
Online Publication Date May 8, 2015
Publication Date Apr 9, 2017
Deposit Date Mar 11, 2016
Publicly Available Date Mar 11, 2016
Journal The European journal of finance
Print ISSN 1351-847X
Electronic ISSN 1466-4364
Publisher Routledge
Peer Reviewed Peer Reviewed
Volume 23
Issue 5
Pages 427-455
Keywords Directors' trades, Likelihood of insolvency
Public URL
Publisher URL
Additional Information Peer Review Statement: The publishing and review policy for this title is described in its Aims & Scope.; Aim & Scope:


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