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Insider Trading before New Issue Announcements
Jonathan M. Karpoff and Daniel Lee
Vol. 20, No. 1 (Spring, 1991), pp. 18-26
Stable URL: http://www.jstor.org/stable/3666093
Page Count: 9
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On average, insiders are net sellers of their firms' common stock for several months before announcements of new common stock and convertible debt issues. There is no evidence of abnormal insider trading before announcements of straight debt issues. These results suggest that the prospect of legal and market penalties does not deter a significant amount of insider trading before new issue announcements, and are consistent with the hypothesis that managers have superior information that is conveyed to the market through new equity issues.
Financial Management © 1991 Financial Management Association International