Insider risk aversion and trade informativeness: evidence from pre-option-grant selling

Authors

Fei Fang, Clark UniversityFollow
Chong Meng, Utah Valley University
Zhenyang Tang, Clark UniversityFollow
Parianen Veeren, Concordia University

Document Type

Article

Abstract

We examine whether corporate insiders’ stock sales prior to option grant dates reflect underlying risk preferences and influence the informativeness of their trading. Consistent with previous studies suggesting that insiders increase sales before option grants for risk-aversion purposes, we find that trades by pre-grant sellers are significantly less informative, and that the magnitude of pre-grant selling predicts lower trading profitability. These findings suggest that pre-grant selling behavior serves as a proxy for insiders’ risk aversion and helps explain variation in trading informativeness. © 2025 Elsevier Inc.

Publication Title

Finance Research Letters

Publication Date

11-2025

Volume

85

ISSN

1544-6123

DOI

10.1016/j.frl.2025.107887

Keywords

insider trading, option grants, risk aversion

Repository Citation

Fang, Fei; Meng, Chong; Tang, Zhenyang; and Veeren, Parianen, "Insider risk aversion and trade informativeness: evidence from pre-option-grant selling" (2025). School of Business. 235.
https://commons.clarku.edu/faculty_school_of_management/235