Do Secondary Shares in the IPO Process Have a Negative Effect on Aftermarket Performance?

20 Pages Posted: 15 Oct 2007

See all articles by James C. Brau

James C. Brau

Brigham Young University

Mingsheng Li

Bowling Green State University - College of Business Administration

Jing Shi

Macquarie University

Abstract

We revisit and extend the topic of secondary share sales and revisions in IPOs. First we test to determine if secondary share sales constitute a negative signal that is captured in aftermarket performance. We find secondary share sales in general are not correlated with poorer initial or long-run performance, but selling by officers and directors is associated with poorer long-run returns. Second, we examine if secondary share revisions 1) reflect selling shareholders' attempts to conceal private information or 2) are contingent upon whether a firm can reach its goal of raising sufficient capital. We find empirical support for a capital goal, but not for concealment.

Keywords: initial public offerings; aftermarket performance, insider selling

JEL Classification: G10, G14, G30, G39

Suggested Citation

Brau, James C. and Li, Mingsheng and Shi, Jing, Do Secondary Shares in the IPO Process Have a Negative Effect on Aftermarket Performance?. Journal of Banking and Finance, Vol. 31, 2007. Available at SSRN: https://ssrn.com/abstract=1020748

James C. Brau (Contact Author)

Brigham Young University ( email )

TNRB 640
Marriott School
Provo, UT 84602
United States
801-318-7919 (Phone)
801-422-0108 (Fax)

HOME PAGE: http://marriottschool.byu.edu/emp/brau/

Mingsheng Li

Bowling Green State University - College of Business Administration ( email )

Bowling Green, OH 43403
United States

Jing Shi

Macquarie University ( email )

Eastern Rd.
North Ryde
Sydney, NSW 2109
Australia

HOME PAGE: http://https://researchers.mq.edu.au/en/persons/jing-shi

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