Corporate Transactions in Hard-to-Value Stocks

Fisher College of Business Working Paper No. 2021-03-16

Charles A. Dice Center Working Paper No. 2021-16

Review of Corporate Finance Studies, forthcoming

54 Pages Posted: 5 Oct 2021 Last revised: 29 Nov 2021

See all articles by Itzhak Ben-David

Itzhak Ben-David

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER)

Byungwook Kim

Ohio State University (OSU) - Department of Finance

Hala Moussawi

Stanford Graduate School of Business

Darren T. Roulstone

Ohio State University (OSU) - Fisher College of Business

Date Written: September 29, 2021

Abstract

Hard-to-value stocks provide opportunities for managers to exploit their informational advantage through trading on their firms' and their own personal accounts. In contrast to the prediction that such transactions reflect private information about future events, they are contrarian and heavily depend on past returns. Corporate transactions in hard-to-value stocks outperform those in easy-to-value stocks in the early part of our sample, but this difference disappears after 2002, coinciding with a general decline in the profitability of stock market anomalies. Our evidence is consistent with managers' perception of mispricing, rather than private information, being a key motivator of their transactions.

Keywords: insiders, repurchases, seasoned equity o fferings, private information, mispricing

JEL Classification: G12, G14, G23, G32

Suggested Citation

Ben-David, Itzhak and Kim, Byungwook and Moussawi, Hala and Roulstone, Darren T., Corporate Transactions in Hard-to-Value Stocks (September 29, 2021). Fisher College of Business Working Paper No. 2021-03-16, Charles A. Dice Center Working Paper No. 2021-16, Review of Corporate Finance Studies, forthcoming, Available at SSRN: https://ssrn.com/abstract=3935973

Itzhak Ben-David (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

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HOME PAGE: http://https://u.osu.edu/ben-david.1/

National Bureau of Economic Research (NBER) ( email )

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HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/

Byungwook Kim

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

Hala Moussawi

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Darren T. Roulstone

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

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