Insider Trading and Financing Constraints

Ataullah, Ali; Goergen, Marc and Le, Hang (2014). Insider Trading and Financing Constraints. Financial Review, 49(4) pp. 685–712.

DOI: https://doi.org/10.1111/fire.12053

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.

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About

• Item ORO ID
• 50861
• Item Type
• Journal Item
• ISSN
• 0732-8516
• Academic Unit or School
• Faculty of Business and Law (FBL) > Business > Department for Accounting and Finance
  Faculty of Business and Law (FBL) > Business
  Faculty of Business and Law (FBL)
• Related URLs
• • http://eprints.nottingham.ac.uk/50671/(Other)
• Depositing User
• Ali Ataullah