Do Swedish insiders trade on the basis of private information of goodwill impairments?

Abstract: We investigate whether Swedish insiders use an information advantage on future goodwill impairments to engage in net selling activity prior to public announcement. We further hypothesize greater insider net selling in impairment firms with a higher degree of goodwill in their balance sheets and in impairment firms in less transparent information environments. The insider trading is traced two years prior to the announcement of goodwill impairments in a sample between 2004-2012. Univariate and multivariate analyses are performed, comparing impairment firms with non-impairment firms. The results indicate that impairment firms engage in abnormal net selling up to six months prior to the announcement date. In addition, impairment firms with a higher degree of goodwill and with higher transparency are net selling to a higher extent up to six months prior to announcement date, although these findings only provide moderate predicting values. No significant results are discovered earlier than six months prior to announcement. These findings are incongruent with previous research.