Information Asymmetry, R&D, and Insider Gains
Aboody and Lev identify R&D as a specific source of information asymmetry, making firm context essential when comparing insider purchases.
Aboody and Lev ask where insiders’ informational advantage comes from rather than treating it as uniform across firms. They focus on research and development, an economically important input that is difficult for outsiders to observe and whose accounting treatment reveals limited detail. Using data from 1985 through 1997, they compare insider gains in R&D-intensive firms with those in firms reporting no R&D.
The study finds substantially larger insider gains in R&D-intensive companies and evidence that insiders use information about planned changes in R&D budgets. The interpretation is an information-asymmetry channel: internally visible projects, technical progress, and budget decisions are hard for public reports to summarize contemporaneously. That conclusion is conditional. R&D intensity is not a universal proxy for mispricing, and the paper studies historical insider gains rather than a modern outsider’s result after a filing appears.
For Insider Atlas, this is the basis for placing sector and company characteristics next to transactions. A purchase at a development-stage technology or biotechnology issuer is not automatically more consequential, but it occurs in a different information environment from a transaction at a mature, heavily followed firm. The site currently has sector but not standardized R&D intensity, so it must not imply it has reproduced the paper’s cross-section. The synthesis assigns this high-asymmetry condition below the direct evidence for non-routine and multi-insider purchases, and the methodology identifies R&D as a future descriptive cross-tab rather than a score.
Abstract excerpt
“We focus on research and development (R&D)—an increasingly important yet poorly disclosed productive input—as a potential source of insider gains.”
Connections in Insider Atlas
The technology-sector NTSK purchase cluster and NTSK company page demonstrate the available sector context; neither page asserts that NTSK matches the paper’s R&D sample.