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Previous work examined the long-run profitability of strategies mimicking the trades company directors in the shares of their own company, as a way of testing for market efficiency. The current paper examines patterns in abnormal returns in the days around these trades on the London Stock Exchange.We find movements in returns that are consistent with directors engaging in shortterm market timing. We also report that some types of trades have superior predictive content over future returns. In particular, medium-sized trades are more informative for short-term returns than large ones, consistent with Barclay and Warner's (1993)`stealth trading' hypothesis whereby informed traders avoid trading in blocks.Another contribution of this study is to properly adjust the abnormal return estimates for microstructure (spread) transactions costs using daily bid-ask spread data. On a net basis, we find that abnormal returns all but disappear.

Previous work has identified that IPOs underperform a market index, and the purpose of this paper is to examine the robustness of this finding. We re-examine the evidence on the long-term returns of IPOs in the UK using a new data set of firms over the period 1985 ±92, in which we compare abnormal performance based on a number of alternative methods including a calendar-time approach. We find that, using an event-time framework, there are substantial negative abnormal returns to an IPO after the first 3 years irrespective of the benchmark used. However, over the 5 years after an IPO, abnormal returns exhibit less dramatic underperformance, and the conclusion on negative abnormal returns depends on the benchmark applied. Further if these returns are measured in calendar time, we find that the (statistical) significance of underperformance is even less marked.

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This paper examines the pay-performance relationship between executive cash compensation (including bonuses) and company performance for a sample of large UK companies, focusing particularly on the financial services industry, since incentive misalignment has been blamed as one of the factors causing the global financial crisis of 2007-2008. Although we find that pay in the financial services sector is high, the cash-plus-bonus pay-performance sensitivity of financial firms is not significantly higher than in other sectors. Consequently, we conclude that it unlikely that incentive structures could be held responsible for inducing bank executives to focus on short-term results.