Information Content of Insider Trading Around Seasoned Equity Offering

31 Pages Posted: 22 Jan 2003

See all articles by Oliver M. Rui

Oliver M. Rui

China Europe International Business School (CEIBS)

Michael Firth

Lingnan University - Department of Finance and Insurance

Ken Ching

Hong Kong Polytechnic University - School of Accounting and Finance

Date Written: Novermber 15, 2001

Abstract

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

Rui, Oliver M. and Firth, Michael and Ching, Ken, Information Content of Insider Trading Around Seasoned Equity Offering (Novermber 15, 2001). Available at SSRN: https://ssrn.com/abstract=337861 or http://dx.doi.org/10.2139/ssrn.337861

Oliver M. Rui (Contact Author)

China Europe International Business School (CEIBS) ( email )

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Pudong
Shanghai 201206
China
86-21-28905618 (Phone)
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HOME PAGE: http://https://www.ceibs.edu/rui-oliver

Michael Firth

Lingnan University - Department of Finance and Insurance ( email )

Castle Peak Road
Tuen Mun, New Territories
Hong Kong
China
+852 2616 8160 (Phone)
+852 2466 4751 (Fax)

Ken Ching

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

M715, Li Ka Shing Tower
Hung Hom, Kowloon, Kowloon
Hong Kong

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