Are internet firms different?: evidence from insider trading

Bert Scholtens and Elke Snijder
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Elke Snijder: Groningen University

No 01E49, Research Report from University of Groningen, Research Institute SOM (Systems, Organisations and Management)

Abstract: This study investigates whether the information content of insider transactions, with a focus on sell transactions, is different for high growth, high volatility Internet-based firms. Prior research on more “traditional” firms has found a small, but significant negative abnormal return with insider sells, which points to an association of insider sells with negative information about the firm by outsiders. We employ several models to examine over 1,000 inside transactions for more than 100 NETDEX firms to find that for Internet firms, insider sells are not followed by a significant negative abnormal return. Firm size effects differ between the different methods employed. In conclusion, it appears that while insider sales in traditional firms are motivated by information asymmetry reason, insider sales in Internet firms are not. We conclude that Internet firms are different indeed.

Date: 2001
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