Insider Trading Around Bank Failures

In this paper we examine insider trading around bank failures. We examine insider trading around four major bank failures that took place in the 1980's. The four failures that are examined are Continental Illinois National Bank and Trust Company, First City Bancorp., First Republic Bank and Mbank. We find that insiders in both the failed bank, as well as non-failed banks, change their trading behavior in the time period surrounding large bank failures. Moreover, we find that insiders in failing banks exhibit different trading patterns than insiders in non-failed banks. We find insiders in the failed bank are larger sellers of their banks stock around the time of the failure than insiders in other banks