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Insider trading and financing constraints

journal contribution
posted on 24.03.2015 by Ali Ataullah, Marc Goergen, Hang Le
Insider trading may alleviate financing constraints by conveying value-relevant information to the market (the information effect) or may exacerbate financing constraints by impairing market liquidity and distorting insiders' incentives to disclose value-relevant information (the confidence effect). We examine the significance of these two contrasting effects by investigating the link between insider trading and financing constraints as measured by the investment-cash flow sensitivity. We find that, overall insider trading exacerbates financing constraints; however the information effect dominates the confidence effect for insider purchases. Only trades by executive directors are significantly related to financing constraints.

History

School

  • Business and Economics

Department

  • Business

Published in

Financial Review

Volume

49

Issue

4

Pages

685 - 712

Citation

ATAULLAH, A., GOERGEN, M. and LE, H., 2014. Insider trading and financing constraints. Financial Review, 49 (4), pp. 685 - 712.

Publisher

Wiley / © The Eastern Finance Association

Version

VoR (Version of Record)

Publisher statement

This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/

Publication date

2014

Notes

This article is closed access.

ISSN

0732-8516

eISSN

1540-6288

Language

en

Exports