Insider trading, pricing and the long-run performance of IPOs: evidence from the French market during the high-tech bubble

Patrick Sentis

Venture Capital, 2008, vol. 11, issue 2, 107-132

Abstract: This article empirically examines the relationship between insider (entrepreneurs and venture capitalists) trading and underpricing and long-run performance in a sample of 120 initial public offerings (IPOs) that took place on the Nouveau Marché in France during the high-tech bubble. We hypothesize that insiders were better informed than the market about the future prospect of the firms, particularly during the high-tech bubble characterized by strong information asymmetry. Trading activity was measured at the IPO date and over a three-year period after this date. We find no evidence suggesting that entrepreneurs and venture capitalists knowingly issue overvalued equity at the IPO date. However, there is weak, but statistically significant, evidence that suggests that entrepreneurs and venture capitalists acquire private information during the first years of flotation and have the ability to take advantage of it by selling overvalued equity. Both these types of insider seem to be the best informed on the future value of the firm. However, changes in ownership of banks and other shareholders are not followed by significant change in the firm's long term value.

Date: 2008
References: View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1080/13691060902764621 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:veecee:v:11:y:2008:i:2:p:107-132

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/TVEC20

DOI: 10.1080/13691060902764621

Access Statistics for this article

Venture Capital is currently edited by Colin Mason and Richard T. Harrison

More articles in Venture Capital from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().