Information leakage in family firms: Evidence from short selling around insider sales

Using a novel insider trading and short selling dataset from the Hong Kong Stock Exchange (HKEx), we investigate potential information leakage from corporate insiders to short sellers, particularly in family firms. Even without the presence of market makers in the HKEx, we document a significant increase in short selling volume before insider trades are released to the public. The non-monotonic relationship between the short selling intensity and family control contributes to the debate on whether family presence facilitates or limits information leakage. In addition, trading by non-family insiders is more likely to convey private information, as compared to family insiders.