Although prior work indicates that insider purchases signal undervaluation, there is scant evidence about what specific information such purchases convey, or what determines the extent of the undervaluation. Our theory explains the nature of the information conveyed by insider purchases, their...

We provide evidence that outside directors’ trading and ratification decisions are incrementally useful in assessing their independence. Because crises test the independence of boards, we first investigate the CEO replacement decision in firms caught intentionally misreporting earnings. We...