Corporate Governance and the Information Content of Insider Trades
Jagolinzer, Larcker, and Taylor show that general-counsel approval constrains informed trading more effectively than a calendar window alone.
Jagolinzer, Larcker, and Taylor examine the internal governance process behind insider trades. Rather than treating a blackout calendar as the entire control system, they focus on the general counsel, the executive responsible for shaping and enforcing firm-level trading policy. Their proprietary survey data allow them to compare restricted windows with transactions that require legal approval.
The paper finds that insider trading profits and links with later operating performance are higher for trades inside firm-imposed restricted windows, a result that cautions against assuming a calendar rule is self-enforcing. When general-counsel approval is required, those measures are substantially lower. The distinction complements Bettis, Coles, and Lemmon: a written blackout policy can suppress activity, while active preclearance changes which trades proceed.
Insider Atlas cannot observe most internal approval records. Form 4 footnotes sometimes identify Rule 10b5-1 plans, and transaction codes reveal many compensation-related events, but neither field establishes whether counsel reviewed a trade or what the insider knew. The site’s routine badge is therefore intentionally modest: it is a transaction-code proxy, not a governance score and not Cohen, Malloy, and Pomorski’s full historical classifier. This paper explains why seemingly neat calendar labels should remain provisional and why routine-only cluster windows stay available for inspection without entering the headline count.
Abstract excerpt
“This study examines the role of the general counsel (GC) in mitigating informed trading by corporate insiders.”
Connections in Insider Atlas
The LOW routine-only cluster and LOW company page show observable Form 4 codes. They do not expose firm policy or general-counsel approval.