Faculty of Business Administration
FBA Distinguished Scholar Seminar
Hosted by The Business Research and Training Center


Digital Insiders and Informed Trading Before Earnings Announcements

Deputy Head of Department and Professor of Managerial Accounting,
University of Melbourne

Date: Wednesday, 3 November 2021
Time: 2:30 pm
Online registration:



In addition to growing risk from hackers stealing customer information, an increasingly common cybersecurity risk for firms stems from digital insiders – hackers who target corporations to obtain non-public corporate information for illegal trading. We propose and validate two firm-specific measures of cybersecurity risk mitigation based on textual analysis of 10-Ks to proxy for the organization’s ability to reduce the probability of digital insider trading. We find that a larger share of new earnings information is incorporated into prices prior to earnings announcements for firms with low cybersecurity risk mitigation scores and that pre-announcement trading by short sellers is more predictive of earnings surprises for these firms. Also suggestive of informed trading, for firms with lower cybersecurity risk mitigation scores we find an increase in stock and option trading volume and higher intraday price volatility during several weeks prior to earnings announcements.


Prof. Naomi Soderstrom is Deputy Head of Department and Professor of Managerial Accounting at the University of Melbourne.  Naomi received her PhD in Accounting and Information Systems from Northwestern University. Her primary research areas are managerial accounting and sustainability accounting. Naomi’s work has appeared in major journals including Journal of Accounting and Economics, Journal of Accounting Research, The Accounting Review, Journal of the American Medical Association, Review of Accounting Studies, Contemporary Accounting Research, Journal of Management Accounting Research, Journal of Accounting, Auditing, and Finance, and Journal of Accounting and Public Policy in the U.S. and Accounting Organizations and Society and the European Accounting Review in Europe. She is Editor of the Journal of Managerial Accounting Research and on the editorial boards of several other journals. She is a member of professional organisations on thee continents, as well as the academic honor societies, Phi Beta Kappa and Beta Gamma Sigma.