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Insider Trading before New Issue Announcements

Jonathan M. Karpoff and Daniel Lee
Financial Management
Vol. 20, No. 1 (Spring, 1991), pp. 18-26
Published by: Wiley on behalf of the Financial Management Association International
Stable URL: http://www.jstor.org/stable/3666093
Page Count: 9
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Insider Trading before New Issue Announcements
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Abstract

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.

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