Directors' Dealing and Post†IPO Performance

Hafiz Hoque and Meziane Lasfer

European Financial Management, 2015, vol. 21, issue 1, 178-204

Abstract: 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.

Date: 2015
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