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 journalArticle

20 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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