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Insider trading and financing constraints

Ataullah, Ali, Goergen, Marc and Le, Hang 2014. Insider trading and financing constraints. Financial Review 49 (4) , pp. 685-712. 10.1111/fire.12053

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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.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HG Finance
Uncontrolled Keywords: Insider trading;investment-cash flow sensitivity;financing constraints;information hierarchy hypothesis;G1;G3
Publisher: Wiley Blackwell
ISSN: 0732-8516
Date of First Compliant Deposit: 30 March 2016
Last Modified: 30 Jun 2019 16:30

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