Insider trading and financing constraints

Ataullah, Ali, Goergen, Marc and Le, Hang (2014) Insider trading and financing constraints. Financial Review, 49 (4). pp. 685-712. ISSN 1540-6288

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Insider trading may alleviate financing constraints by conveying value‐relevant information to the market (the information effect) or may exacerbate financing constraints by impairing market liquidity and distorting insiders’ incentives to disclose value‐relevant information (the confidence effect). We examine the significance of these two contrasting effects by investigating the link between insider trading and financing constraints as measured by the investment‐cash flow sensitivity. We find that, overall insider trading exacerbates financing constraints; however the information effect dominates the confidence effect for insider purchases. Only trades by executive directors are significantly related to financing constraints.

Item Type: Article
Schools/Departments: University of Nottingham, UK > Faculty of Social Sciences > Nottingham University Business School
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Depositing User: Eprints, Support
Date Deposited: 26 Mar 2018 09:48
Last Modified: 04 May 2020 16:55

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