The information content of insider trading around seasoned equity offerings |
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| Institution: | 4. Risk and Insurance Research Center, National Chengchi University, Taiwan;1. Spears School of Business, Oklahoma State University, 461 Business Building, Stillwater, OK 74078, United States;2. Neeley School of Business, Texas Christian University, Tandy Hall, Fort Worth, TX 76109, United States;3. Ivy College of Business, Iowa State University, 3115 Gerdin Business Building, Ames, IA 50011, United States;1. La Trobe University, Bundoora, Vic 3086, Australia;2. Hanoi University, Km 9 Nguyen Trai Road, Thanh Xuan District, Hanoi, Viet Nam;3. Khalifa University, Abu Dhabi, United Arab Emirates |
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| Abstract: | This paper examines insider trading around seasoned equity offering (SEO) announcements in Hong Kong. The announcements of private placings (rights offerings) are associated with positive (negative) abnormal stock returns. However, longer-term stock returns are negative for both private placings and rights offerings. In general, insiders are net purchasers in placing firms in the 6 months prior to and 6 months subsequent to the SEO, whereas insiders are net sellers in rights issue firms in the 6 months prior to and 6 months subsequent to the issue. The net purchases made by the insiders of firms making placements help them maintain their control rights, which are otherwise diluted by the placements. Insider trading does not explain longer-term investment returns. |
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