Business, Legal & Accounting Glossary
Company executives purchasing shares of a company’s stock is called insider buying.
Since insiders necessarily have a better understanding of a company’s strategies, performance, and industry than do outsiders, investors often take insider buying as a positive sign for the company and therefore the stock. However, since investors are prohibited from trading on material, non-public information (commonly referred to as insider trading), insider buying can’t be taken as a positive indicator above and beyond what an investor might learn on his or her own.
Some investors also believe that high insider ownership suggests company executives are aligned with shareholders because their personal net worth is directly tied to the performance of the company. For these investors, insider buying would indicate an engaged and effective management.
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This glossary post was last updated: 6th August, 2021 | 0 Views.