Opportunistic insider trading: An analysis of symbolic insider purchases

We introduce symbolic insider purchase (SIP), a form of opportunistic insider trades on a small scale that is strategically used by inside directors and executives (ID&Es) to obfuscate retail investors’ judgment and mitigate the adverse effects of ID&Es’ sell-offs. We define the ID&Es’ purchases of fewer than 1,000 shares in the Chinese stock market as SIPs. Using 2009–2021 data on Chinese A-share-listed firms, we find that SIPs neither contain value-relevant information nor convey positive management signals, unlike regular insider purchases. Instead, SIPs are associated with increased sell-offs by ID&Es and appear to provide a buffer against price volatility and negative market reactions to these sell-offs. SIPs attract retail investors’ attention, intensifying their sentiment and disagreement, which in turn increases trading volume and enhances stock liquidity. When accompanied by SIPs, ID&Es’ sell-offs attract less regulatory scrutiny due to tempered adverse market reaction.