Following pro rata spinoffs, shareholders, including insiders, trade their
stock holdings in public subsidiaries independently of trades in parent fir
ms. This article examines the predictive ability of informed trading with r
espect to post-spin-off stock performance and corporate control transaction
s. I find that subsequent to spin-offs, insiders are substantial purchasers
of stock in public subsidiaries and sellers in parent firms. The trades of
insiders are significantly related to post-spin-off stock returns, takeove
rs, and delistings of spun-off firms. The results are highly significant fo
r senior managers of public subsidiaries, but they do not generally hold fo
r outside directors or large blockholders.