Whose opinion matters when insiders disagree with short sellers?

This study investigates the credibility of conflicting trading signals from two well-informed and sophisticated parties: corporate insiders and short sellers. Our results suggest that insiders’ information is dominant when short sellers trade in the opposite direction. We attribute the positive price reaction following a disagreement to insiders’ superior information that is not available to short sellers. Our results do not support the managerial short-termism argument. Two additional tests show that insider buying credibility enhances when information asymmetry is high and that short sellers reverse their shorting position after the disclosure of insider buying. Both findings support the idea that short sellers may experience a previously unacknowledged barrier in accessing private information.