Paper

{
  "raw_xml": "<entry>\n    <id>http://arxiv.org/abs/2602.17890v1</id>\n    <title>The Information Dynamics of Insider Intent: How Reporting Inversions (Form 144) Mask Informational Rents in Insider Sales (Form 4)</title>\n    <updated>2026-02-19T23:09:14Z</updated>\n    <link href='https://arxiv.org/abs/2602.17890v1' rel='alternate' type='text/html'/>\n    <link href='https://arxiv.org/pdf/2602.17890v1' rel='related' title='pdf' type='application/pdf'/>\n    <summary>This study identifies and quantifies a significant informational friction embedded in the SEC Form 144 disclosure regime, characterized as predictive decoupling. Drawing on a theoretical foundation of welfare economics, the article argues that the current reporting inversion -- where trade execution (Form 4) frequently precedes the public notice of intent (Form 144) -- violates the conditions for Pareto efficiency by inducing non-symmetric pricing. Utilizing an event-study framework of intent-to-sell windows, the analysis examines cases where insiders file a notice of proposed sale but fail to execute within the statutory 90-day period. The machine learning audit reveals a persistent 52.4 percent opacity rate, where aborted signals remain statistically indistinguishable from routine executions, creating a structural information ceiling that prevents the market from exhausting the signal's informational content. Contrary to the traditional small-firm effect, the study documents a large-cap significance paradox: while small-cap portfolios yield higher absolute abnormal returns (32.21 bps), statistically significant alpha is concentrated in large-cap firms (14.49 bps, $p = 0.021$). The results suggest that Institutional Salience enables more reliable processing of this negative non-event when reputational costs are maximized. Cross-sectional tests confirm that prior idiosyncratic volatility serves as a signal amplifier, with causal estimators identifying an illiquidity jump of up to 2.63 times. To mitigate this market failure, the study proposes a mandatory execution confirmation (Form 144-A) to transition the regime toward bilateral accountability, converting a predictive blind spot into a verifiable data stream and restoring the informational symmetry requisite for efficient capital allocation.</summary>\n    <category scheme='http://arxiv.org/schemas/atom' term='q-fin.CP'/>\n    <published>2026-02-19T23:09:14Z</published>\n    <arxiv:primary_category term='q-fin.CP'/>\n    <author>\n      <name>Krishna Neupane</name>\n    </author>\n  </entry>"
}