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AUDIT COMMITTEES AND INSIDER TRADING AT U.S. BANKS
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Brian Bolton 
Abstract
This paper studies the relationship between insider stock trades by audit committee members and financial concerns at U.S. banks during the 2000s. We initially show that banks with large amounts of discretionary loan loss accruals experience larger stock sales by audit committee members. These stock sales are then associated with banks experiencing subsequent financial problems, measured by firm performance, restatements, and the likelihood of receiving TARP assistance in 2008 and 2009. This suggests that legal insider trading by audit committee members can provide information about a bank’s financial condition and financial statement quality. While this study is focused on commercial banks, the results likely apply to larger samples and to trading by other classes of insiders.
Keywords: Corporate Governance, Agency Problems, Insider Trading, Financial Crisis, Earnings Management, Audit Committee
How to cite this paper: Bolton, B. (2011). Audit committees and insider trading at U.S. banks [Special issue]. Corporate Ownership & Control, 8(2), 14-31. https://doi.org/10.22495/cocv8i2sip2
