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Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/25994

Title: What Do Independent Directors Know? Evidence from Their Trading
Authors: Ravina, Enrichetta
Sapienza, Paola
Issue Date: Dec-2006
Series/Report no.: CLB-06-021
Abstract: We compare the trading performance of independent directors and other officers of the firm. We find that independent directors earn positive and substantial abnormal returns when they purchase their company stock, and that the difference with the same firm’s officers is relatively small at most horizons. The results are robust to controlling for firm fixed effects and to using a variety of alternative specifications. Executive officers and independent directors make higher returns in firms with weaker governance and the gap between these two groups widens in such firms. Independent directors who sit in audit committees earn higher return than other indepen- dent directors at the same firm. Finally, independent directors earn significantly higher returns than the market when they sell the company stock in a window before bad news and around arestatement announcement.
URI: http://hdl.handle.net/2451/25994
Appears in Collections:NYU Pollack Center for Law & Business Working Papers

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