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Directors' Dealing and Post‐IPO Performance
Author(s) -
Hoque Hafiz,
Lasfer Meziane
Publication year - 2015
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/j.1468-036x.2013.12013.x
Subject(s) - initial public offering , business , valuation (finance) , insider , insider trading , monetary economics , valuation effects , accounting , finance , economics , political science , law
We use a unique mainly hand‐collected dataset to assess the impact of directors' trades on IPOs' long‐term returns. We find that IPOs where directors are net sellers are more likely to generate positive long‐run returns which occur mostly before the sell trades, suggesting that directors sell when their IPOs reach their optimal values. Conversely, IPOs where directors are net buyers underperform significantly. Our results are not consistent with insider trading in seasoned firms, partly because the valuation uncertainty of IPOs and the specific motivations to trade weaken the precision of the trades' informativeness.