The liquidity impact of insider trading on small and medium size enterprises

Valeriya V. Posylnaya, Brandon N. Cline, Joshua R. Aaron

Research output: Contribution to journalArticlepeer-review


This study compares the impact of insider trading by corporate employees of small and medium-sized enterprises (SMEs) on the stock price liquidity of these firms with that of larger institutions. Using publicly reported data, we assess how trades placed by SME insiders affect the bid-ask spread of their companies’ stock. We document that the spread gets significantly larger following these transactions relative to trades by insiders from larger firms. Collectively, the evidence suggests that insider trading by SME executives, as well as non-executives, decreases liquidity for their firms. One important implication from our findings is that the cost of insider trading is more severe for SMEs, firms characterized by greater information asymmetry.

Original languageEnglish (US)
Pages (from-to)72-83
Number of pages12
JournalJournal of Small Business Strategy
Issue number2
StatePublished - Jun 2019

Bibliographical note

Publisher Copyright:
© 2019 Small Business Institute®.


  • Bid-ask spread
  • Insider trading
  • Small business


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