Abstract

http://ssrn.com/abstract=1571514
 
 

References (55)



 
 

Citations (1)



 


 



Insider Ownership and Shareholder Value: Evidence from New Project Announcements


Meghana Ayyagari


George Washington University - School of Business

Radhakrishnan Gopalan


Washington University in Saint Louis - John M. Olin Business School

Vijay Yerramilli


University of Houston, C. T. Bauer College of Business

December 9, 2011

AFA 2012 Chicago Meetings Paper

Abstract:     
How does insider ownership affect shareholder value? We answer this question by examining how the marginal valuation of new investment projects announced by Indian firms varies with the level of insider holding in the firm, and other firm and project characteristics. We find that among projects announced by firms affiliated with business groups, announcement returns are significantly lower, and usually negative, for projects announced by firms with low insider holding. This effect is mainly driven by projects that result in either the firm or the business group diversifying into a new industry. On average, diversification projects announced by firms with low insider holding have negative announcement returns. The negative effect of low insider holding is larger in firms with high level of free cash flows. Overall, our results are consistent with insiders expropriating outside shareholders by selectively housing more (less) valuable projects in firms with high (low) insider holding.

Number of Pages in PDF File: 51

Keywords: Insider Holding, Business Groups, Diversification

JEL Classification: G30, G31, G32

working papers series


Download This Paper

Date posted: March 17, 2010 ; Last revised: December 11, 2011

Suggested Citation

Ayyagari, Meghana and Gopalan, Radhakrishnan and Yerramilli, Vijay, Insider Ownership and Shareholder Value: Evidence from New Project Announcements (December 9, 2011). AFA 2012 Chicago Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1571514 or http://dx.doi.org/10.2139/ssrn.1571514

Contact Information

Meghana Ayyagari
George Washington University - School of Business ( email )
Washington, DC 20052
United States
Radhakrishnan Gopalan
Washington University in Saint Louis - John M. Olin Business School ( email )
One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
Vijay Yerramilli (Contact Author)
University of Houston, C. T. Bauer College of Business ( email )
Houston, TX 77204
United States
713-743-2516 (Phone)
Feedback to SSRN


Paper statistics
Abstract Views: 636
Downloads: 108
Download Rank: 148,532
References:  55
Citations:  1

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.281 seconds