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Insider trading and financing constraints
journal contribution
posted on 2015-03-24, 11:12 authored by Ali Ataullah, Marc Goergen, Hang LeInsider 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 ReviewVolume
49Issue
4Pages
685 - 712Citation
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 AssociationVersion
- 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
2014-10-16Notes
This article is closed access.ISSN
0732-8516eISSN
1540-6288Publisher version
Language
- en
