Constructing Insider Holdings from Computerized Sec Transactions Data

Studies of ownership structure generally extract the insider holdings for officers and directors from proxy statements, which has three disadvantages: (1) the data must be manually extracted, assembled, and entered into the experimental dataset; (2) dates for the insider holdings are limited to the dates given in the proxy statements; and (3) the insider holdings include only officers and directors. This paper describes a way to construct the holdings for all insiders, not just officers and directors, at any arbitrary time, for any firm reporting to the Securities Exchange Commision (SEC), by using the data files from the SEC’s computerized Ownership Reporting System (ORS). A test of this ORS-based measure against a sample of proxy statements found that, for 90 percent of the 77 useable proxy statements, the ORS-based measure was within 5 percent of the proxy data. The ORS data are noisy, though, and the resulting values for insider holdings could contain both noise and some degree of bias. Although the ORS-based measure almost certainly is not as reliable as proxy data, it is suitable, and sometimes the only feasible alternative, for some research designs. A great deal of time was spent in ferreting out certain important information about the documentation and the data. This paper furnishes that information in sufficient technical detail to substantially flatten the learning curve for other researchers who want to use the ORS data, whether to derive insider holdings or to study other aspects of the data.