Insider trading and financing constraints

Ataullah, Ali, Goergen, Marc ORCID: https://orcid.org/0000-0003-4391-2651 and Le, Hang 2014. Insider trading and financing constraints. Financial Review 49 (4) , pp. 685-712. 10.1111/fire.12053

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Abstract

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:	16 Nov 2023 10:28
URI:	https://orca.cardiff.ac.uk/id/eprint/67313

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