Accrual Information and Insider Trading: An Empirical Analysis

Managers have the ability to time the disclosure of the non-cash component of earnings, which, is termed accrual information, to outside investors. They have the choice of disclosing accrual information at the earnings announcement or waiting until the filing date. This thesis examines whether managers profit from this ability by strategically disclosing or withholding accrual information when it increases their profits from trading shares of the firms they manage. This thesis also examines if strong corporate governance restrains such managerial opportunism. The evidence presented here is consistent with managers using their discretion over the timing of the release of accrual information to increase their trading profits. However, these results should be interpreted with caution because of issues with endogeneity. This thesis finds no evidence of strong corporate governance mitigating this managerial opportunism.