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<p>This paper investigates whether insider purchase transactions convey incremental, value-relevant information to the Indian equity market. Using a large sample of high-value insider purchases disclosed under SEBI’s PIT Regulations, we conduct an event-study analysis over 30-, 60-, and 90-day post-disclosure windows. The results show economically meaningful and statistically significant positive abnormal returns, with a 90-day CAAR of 6.67%, indicating that insider buying is followed by sustained market outperformance. The post-event drift persists well beyond the immediate reaction window, suggesting gradual incorporation of insider-related information. The findings remain robust under an alternative market model specification that adjusts expected returns for firm-specific alpha and beta. The purchase-only focus is deliberate, as prior evidence generally finds insider purchases to be a cleaner and stronger signal than insider sales, which may be driven by liquidity, diversification, tax-planning, or other personal-finance motives. Cross-sectional tests reveal a robust negative association between firm size and cumulative abnormal returns: smaller firms exhibit markedly stronger post-purchase performance, consistent with higher information asymmetry. After adding book-to-market and pre-event momentum as additional asset-pricing controls, firm size remains the most consistent determinant of return heterogeneity. Book-to-market is positively associated with post-purchase CARs, while pre-event momentum enters with a negative and marginally significant coefficient. In contrast, neither trade value nor insider category (promoter vs. non-promoter) consistently explains return heterogeneity once these controls are included. Regression results and robustness checks using Newey-West HAC statistics and Market Model estimates further reinforce these patterns. Overall, the evidence demonstrates that insider purchases in India are informative, particularly in smaller firms, and that the market systematically underreacts to these disclosures, leading to persistent abnormal returns.</p>

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Are insider purchases informative? Evidence from Indian firms

  • 期刊论文

  • 发表日期：

    2026年8月5日

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  • Tariq Aziz

摘要

This paper investigates whether insider purchase transactions convey incremental, value-relevant information to the Indian equity market. Using a large sample of high-value insider purchases disclosed under SEBI’s PIT Regulations, we conduct an event-study analysis over 30-, 60-, and 90-day post-disclosure windows. The results show economically meaningful and statistically significant positive abnormal returns, with a 90-day CAAR of 6.67%, indicating that insider buying is followed by sustained market outperformance. The post-event drift persists well beyond the immediate reaction window, suggesting gradual incorporation of insider-related information. The findings remain robust under an alternative market model specification that adjusts expected returns for firm-specific alpha and beta. The purchase-only focus is deliberate, as prior evidence generally finds insider purchases to be a cleaner and stronger signal than insider sales, which may be driven by liquidity, diversification, tax-planning, or other personal-finance motives. Cross-sectional tests reveal a robust negative association between firm size and cumulative abnormal returns: smaller firms exhibit markedly stronger post-purchase performance, consistent with higher information asymmetry. After adding book-to-market and pre-event momentum as additional asset-pricing controls, firm size remains the most consistent determinant of return heterogeneity. Book-to-market is positively associated with post-purchase CARs, while pre-event momentum enters with a negative and marginally significant coefficient. In contrast, neither trade value nor insider category (promoter vs. non-promoter) consistently explains return heterogeneity once these controls are included. Regression results and robustness checks using Newey-West HAC statistics and Market Model estimates further reinforce these patterns. Overall, the evidence demonstrates that insider purchases in India are informative, particularly in smaller firms, and that the market systematically underreacts to these disclosures, leading to persistent abnormal returns.