Do secondary shares in the IPO process have a negative effect on aftermarket performance?

James C. Brau*, Mingsheng Li, Jing Shi

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

22 Citations (Scopus)

Abstract

We revisit and extend the topic of secondary share sales and revisions in IPOs. First we test to determine if secondary share sales constitute a negative signal that is captured in aftermarket performance. We find secondary share sales in general are not correlated with poorer initial or long-run performance, but selling by officers and directors is associated with poorer long-run returns. Second, we examine if secondary share revisions (1) reflect selling shareholders' attempts to conceal private information or (2) are contingent upon whether a firm can reach its goal of raising sufficient capital. We find empirical support for a capital goal, but not for concealment.

Original languageEnglish
Pages (from-to)2612-2631
Number of pages20
JournalJournal of Banking and Finance
Volume31
Issue number9
DOIs
Publication statusPublished - Sep 2007
Externally publishedYes

Keywords

  • aftermarket performance
  • initial public offerings
  • insider selling

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