Insider Trading in Family Firms: Impact of Family Ties and Management Involvement

We study corporate insider trading and information leakages within family firms. We find that the prof-itability of insider purchases of family insiders is higher compared to those of nonfamily insiders. In contrast, the profitability of insider sales of family insiders is lower compared to those of nonfamily insiders, indicating that family members time their insider trades well when buying shares, but not when selling shares. Furthermore, family insiders without management involvement time their insider sales significantly better, compared to family insiders who are involved in the firm management. Regarding information leakage, abnormal short-selling volumes prior to insider sales are higher when shares are sold by family insiders without management involvement, compared to family insiders who are in-volved in management.