City Research Online

Directors' Dealing and Post-IPO Performance

Lasfer, M. & Hoque, H. (2015). Directors' Dealing and Post-IPO Performance. European Financial Management, 21(1), pp. 178-204. doi: 10.1111/j.1468-036x.2013.12013.x


We use a unique dataset to assess whether IPOs where insiders change their holdings have different long-term returns. We find that IPOs where insiders are net sellers are more likely to generate positive long-run returns, while those where they are net buyers underperform. The analysis of individual trades shows that insiders sell when their IPO reaches its optimal value as the excess returns are positive in the pre-event and not significant in the post-event period. For the buy trades the returns are negative in both the pre- and post-trade periods, suggesting that insiders buy to support the price of their IPO, but the post-event returns are not as expected. These results imply that insider trading is a response to firm’s past performance. The valuation uncertainty of IPOs and the specific motivations to trade weaken the precision of the information content of insider trading and its impact on IPO long-run returns.

Publication Type: Article
Additional Information: This is the peer reviewed version of the following article: Hoque, H. and Lasfer, M. (2015), Directors' Dealing and Post-IPO Performance. Eur Financial Management, 21: 178–204., which is published in final form at, H. and Lasfer, M. (2015), Directors' Dealing and Post-IPO Performance. Eur Financial Management, 21: 178–204. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Publisher Keywords: Long run IPO performance, insider trades, London Stock Exchange, market timing
Subjects: H Social Sciences > HG Finance
Departments: Bayes Business School > Finance
SWORD Depositor:
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