Family Affair—Insider Trading and Family Firms: Evidence from Thailand

Thai insiders can earn significant abnormal returns from trading shares of their firms. The effect is more pronounced when trades occurred prior to earnings announcement. The results provide reasoning for regulation that prohibits the insiders to trade prior to earnings announcement. Both family ownership and control structure affect the magnitude of market reaction. The findings support the entrenchment effect in family firms. The presence of specific categories of blockholder has monitoring effect, while some types of blockholder seem to exhance the insiders’ signal and strengthen the market reaction. Significant reduction in abnormal returns earned by insiders in the firm with voluntary blackout policy suggests that the policy effectively forbid the insiders to trade when they possess valuable information that is not available to the public.