Insider Trading and Institutional Holdings in Seasoned Equity Offerings

Ching-Chih Wu and Tung-Hsiao Yang
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Ching-Chih Wu: Department of Finance, National Chung-Hsing University, Taichung City 40227, Taiwan
Tung-Hsiao Yang: Department of Finance, National Chung-Hsing University, Taichung City 40227, Taiwan

JRFM, 2018, vol. 11, issue 3, 1-14

Abstract: We investigate three issues about the impact of insider trades and institutional holdings on seasoned equity offerings (SEOs). First, we test how insider trades affect the trading behavior of institutional investors in SEOs. Second, we test whose trading behavior, either insiders or institutional investors, has greater explanatory power for the performance of SEO firms after issuing new stocks. Third, we analyze the industry-wide spillover effects of insider trades and institutional holdings. Empirically, we find that insiders and institutional investors of SEO firms may utilize similar information in their transactions because insider trades induce similar trading behavior for institutional investors. In addition, insider trades, relative to institutional holdings, have greater explanatory power for SEO firm’s long-term performance. Finally, compared with insider trades, institutional holdings have a more significant spillover effect in the industry of SEO firms.

Keywords: insider trade; institutional holding; spillover effect; contagion effect (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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