TY  - JOUR
AU  - Ravina, Enrichetta
AU  - Sapienza, Paola
TI  - What Do Independent Directors Know? Evidence from Their Trading
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12765
PY  - 2006
Y2  - December 2006
DO  - 10.3386/w12765
UR  - http://www.nber.org/papers/w12765
L1  - http://www.nber.org/papers/w12765.pdf
N1  - Author contact info:
Enrichetta Ravina
230 S LaSalle St
Northwestern University
Global Hub 4391
2211 Campus Drive
Chicago, IL 60604
US
Tel: 312-919-2598
E-Mail: eravina@frbchi.org

Paola Sapienza
Kellogg School of Management
Northwestern University
2221 Campus Drive
Evanston, IL 60208
Tel: 847/491-7436
Fax: 847/491-5719
E-Mail: paola-sapienza@northwestern.edu
M1  - published as Enrichetta Ravina, Paola Sapienza. "What Do Independent Directors Know? Evidence from Their Trading," in Michael Weisbach, editor, "Corporate Governance" The Review of Financial Studies, vol. 23, no. 3, March 2010 (2010)

AB  - We compare the trading performance of independent directors and other officers of the firm. We find that independent directors earn positive and substantial abnormal returns when they purchase their company stock, and that the difference with the same firm's officers is relatively small at most horizons. The results are robust to controlling for firm fixed effects and to using a variety of alternative specifications. Executive officers and independent directors make higher returns in firms with weaker governance and the gap between these two groups widens in such firms. Independent directors who sit in audit committees earn higher return than other independent directors at the same firm. Finally, independent directors earn significantly higher returns than the market when they sell the company stock in a window before bad news and around a restatement announcement.
ER  -