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Title: Insider trading and financing constraints
Authors: Ataullah, Ali
Goergen, Marc
Le, Hang
Keywords: Financing constraints
Information hierarchy hypothesis
Insider trading
Investment-cash flow sensitivity
Issue Date: 2014
Publisher: Wiley / © The Eastern Finance Association
Citation: ATAULLAH, A., GOERGEN, M. and LE, H., 2014. Insider trading and financing constraints. Financial Review, 49 (4), pp. 685 - 712.
Abstract: Insider trading may alleviate financing constraints by conveying value-relevant information to the market (the information effect) or may exacerbate financing constraints by impairing market liquidity and distorting insiders' incentives to disclose value-relevant information (the confidence effect). We examine the significance of these two contrasting effects by investigating the link between insider trading and financing constraints as measured by the investment-cash flow sensitivity. We find that, overall insider trading exacerbates financing constraints; however the information effect dominates the confidence effect for insider purchases. Only trades by executive directors are significantly related to financing constraints.
Description: This article is closed access.
Version: Published
DOI: 10.1111/fire.12053
URI: https://dspace.lboro.ac.uk/2134/17094
Publisher Link: http://dx.doi.org/10.1111/fire.12053
ISSN: 0732-8516
Appears in Collections:Closed Access (Business School)

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