DIRECTORS' TRADES, INFORMATION HIERARCHY AND OWNERSHIP STRUCTURE: EVIDENCE FROM INDIA

In this paper we analyze the market reaction to directors' trades in India and investigate whether the reaction is affected by the nature of trade (purchase or sale), by the type of director making the trade (chief executive officer managing director, promoters, other executive directors, non-executive directors, former directors etc.) or by the ownership structure of the company. We find that the absolute value of market reaction to directors' purchases is significantly greater than to directors' sales; type of director making the trade does not influence the market reaction; presence of dominant institutional investors tends to dilute the positive market reaction to directors' purchases and that the presence of dominant monitoring corporate investors does not influence the market reaction to directors' trades.