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Directors' Dealing and Post-IPO Performance


  • We would like to thank Mark Leland from Directors Deals for supplying the data on insider trading. We gratefully acknowledge comments from an anonymous referee, seminar participants at Cass Business School, Manchester Business School and Nottingham Business School. All remaining errors are our own responsibility. Correspondence: Meziane Lasfer.


We use a unique mainly hand-collected dataset to assess the impact of directors' trades on IPOs' long-term returns. We find that IPOs where directors are net sellers are more likely to generate positive long-run returns which occur mostly before the sell trades, suggesting that directors sell when their IPOs reach their optimal values. Conversely, IPOs where directors are net buyers underperform significantly. Our results are not consistent with insider trading in seasoned firms, partly because the valuation uncertainty of IPOs and the specific motivations to trade weaken the precision of the trades' informativeness.