The information content of bond rating changes and insider trading in Korea

Abstract

This study examines differences in insider groups’ trading behaviours based on their characteristics. We use data on high-frequency insider trading and Korean bond rating change announcements. We find that insiders actively exploit their information advantage, and their transaction behaviour differs based on their position (e.g., blockholders, executives, or largest shareholders). In particular, the largest shareholders are usually the most informed traders among insiders. Our results indicate that market participants can use insider trading as an informative signal to make investment decisions.