The informational effects of large insider stock purchases
ISSN: 0307-4358
Article publication date: 1 January 1999
Issue publication date: 1 January 1999
Abstract
Outlines previous research on the effects of insider trading on share prices and reactions to the tightening up of US laws against illegal trading. Calculates returns for a sample of large managerial purchases made after the new legislation (1993‐1995) and announced in the Wall Street Journal to test for the presence of asymmetric information, agency conflicts and undervaluation; using firm size, market‐to‐book ratio, Q ratio and price‐earnings ratio as proxies. Finds that share prices react positively to large managerial purchases, especially if the firm is small, undervalued and/or experiencing conflicts between managers and shareholders; and that this effect is not reversed within a year.
Keywords
Citation
Roth, G. and Saporoschenko, A. (1999), "The informational effects of large insider stock purchases", Managerial Finance, Vol. 25 No. 1, pp. 37-48. https://doi.org/10.1108/03074359910765849
Publisher
:MCB UP Ltd
Copyright © 1999, MCB UP Limited