Information Content of Insider Trading Around Seasoned Equity Offering
31 Pages Posted: 22 Jan 2003
Date Written: Novermber 15, 2001
This paper examines insider trading around seasoned equity offering announcements in Hong Kong. Consistent with prior studies, we find positive (negative) abnormal returns associated with the announcement of placings (rights offerings). We find evidence that suggests insiders of placing firms delay trading to avoid legal and market penalties. Mature firms are more undervalued relative to growth firms in the placing sub-sample. Furthermore, insiders sell (buy) because of a negative (positive) price response for mature (growth) firms in the rights offering sub-sample. The stock price response to the information content of insider trading depends on the type of security offered. A positive price response is observed for growth firms that announce placements. In general, growth opportunities rather than insider trading explain longer-term investment returns.
Keywords: Insider trading, Placings, Rights offerings, Growth opportunities
JEL Classification: G14
Suggested Citation: Suggested Citation