The Impact of Public Disclosure on Equity Dispositions by Corporate Managers

Abstract

In a recent article, Professor Robert J. Jackson Jr. investigates the impact of public disclosure on equity dispositions by senior managers at Goldman Sachs. Utilizing previously overlooked data, Jackson finds that disclosure of sales per Securities Exchange Act section 16(a) dampens selling. This response critically examines the theoretical link between public disclosure and equity dispositions as well as Jackson’s empirical analyses. Jackson has provided convincing evidence of the existence of the relationship he theorizes, and he has done an admirable job of isolating the impact of public disclosure on sales in the face of potentially confounding influences. Nonetheless, some concerns regarding confounding factors necessarily remain. Moreover, this response suggests that even if public disclosure of sales dampens selling, it is unclear whether Jackson has uncovered a steady-state effect or simply the shifting of sales into periods pre-dating or following the application of public disclosure obligations. It is also unclear whether the results Jackson obtains can be extrapolated to selling by executives for whom public disclosure is not already mandated under section 16(a) or even to selling by executives at firms that place less emphasis on internal ownership than Goldman. These observations are not meant to undermine Jackson’s achievements, but to suggest caution in drawing policy conclusions from these results.

Keywords: equity compensation, public disclosure, section 16(a)

JEL Classification: G34, J33, K22, K34, M52