Insider trading, earnings changes, and stock prices

Article Abstract:

A study is conducted to investigate the impact of reporter insider trading on the information conveyed by annual unexpected earnings. Specifically, it seeks to determine whether insider trading affects the sensitivity of long-window returns to annual earnings and generated information aside from those captured by annual earnings. Data for the study are obtained from a large of sample of companies between 1978 and 1987. An analysis of a sample of 8,301 observations provides support for the conclusion of earlier studies that insider trading in the first months of the year is not a reliable predictor of total unexpected earnings at the end of the year. However, the results of the analysis indicate that a relationship exists between insider trading and unexpected earnings in terms of the information they generated. Findings show that the valuation implications of the direction of the unexpected earnings verify the sign of the direction of net insider trading.

Research, Prices and rates, Stocks, Profits, Stock prices, Insider trading in securities, Insider trading (Securities), Corporate profits

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Controlling EDI

Article Abstract:

Organizations that have implemented electronic data interchange (EDI) should consider the legal, accounting, and control issues related to EDI. Businesses must use proper procedures when accounting for EDI transactions involving payments or dispositions of assets. The Foreign Corrupt Practices Act discourages corporate bribes to foreign officials and imposes requirements on internal accounting controls. The types of controls that are available for EDI include creating an environment that is aware of the possibility of fraud, ensuring that employees are supervised, and appropriately designing third-party network services.

Analysis, Accounting and auditing, Electronic data interchange, EDI (Electronic data interchange), Internal auditing

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