Insider trading restrictions and earnings management Articles uri icon

publication date

  • January 2020

start page

  • 205

end page

  • 237


  • 3


  • 50

International Standard Serial Number (ISSN)

  • 0001-4788

Electronic International Standard Serial Number (EISSN)

  • 2159-4260


  • We study whether firms that voluntarily restrict insider trading have lower incentives for earnings management. Using a large sample of US firms, we measure these restrictions based on the extent to which insider transactions happen shortly after quarterly earnings announcements. We find that the adoption of insider trading restrictions is associated with a reduction of 9.92% in absolute discretionary accruals. Our findings are robust to controlling for changes in corporate governance, and we do not find evidence of a substitution effect between accruals and real earnings management, target beating or timeliness of loss recognition. Taken together, our results indicate that the voluntary adoption of blackout periods that limit insider trading improves the quality of financial reporting.


  • Economics


  • corporate governance; earnings management; voluntary insider trading restrictions