The equity and efficiency of the Australian share market with respect to director trading

Uylangco, Katherine; Easton, Stephen; Faff, Robert W.

doi:10.1108/10309611011060506

Cited by 15 publications

(7 citation statements)

References 18 publications

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“…Another study by Uylangco et al (2010) also focuses on the Australian share market. It explores the extent to which company directors breach the ASX and Australian Corporations Act reporting requirements and whether directors earn abnormal profits by trading in own company stocks.…”

Section: Literature Reviewmentioning

confidence: 99%

Director trading, or lack thereof, and acquiring firm performance

Hossain

Heaney

Koh

2016

ARJ

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Purpose This paper aims to address the question of whether acquiring firm directors trading, prior to a merger or acquisition (M&A) announcement, predicts the share market reaction on M&A announcement. Design/methodology/approach Event studies and cross-section regression were used in this analysis. Findings This paper finds that acquiring firms with no director trading and firms with net director purchases in the 12 months prior to the M&A announcement earn positive abnormal returns. It is also found that share market reaction to M&A announcements is considerably larger for acquiring firms whose directors do not trade relative to those companies with directors who do trade over the prior 12 months. This director non-trading result is further born out in regression analysis. Research limitations/implications The absence of pre-M&A announcement director trading could reflect lower agency costs for the acquiring firm and this might explain to stronger announcement day effect for this group of firms. Practical implications The fact that directors choose not to trade in their shares prior to a M&A transaction appears to be viewed as good news by the market. Social implications Director trading is value relevant for the acquiring firm and so it is critical that director trading is transparent. Originality/value To the best of the authors' knowledge, this question has not been addressed in the literature before, particularly the finding for firms with no director trading in the period prior to the M&A announcement.

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Section: Literature Reviewmentioning

confidence: 99%

Director trading, or lack thereof, and acquiring firm performance

Hossain

Heaney

Koh

2016

ARJ

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“…In terms of insider trades, prior research finds that insiders do appear to place, and profit from, trades based on superior information (for the US: Aboody and Lev, ; Ke et al ., ; Piotroski and Roulstone, ; Huddart et al ., ; Ravina and Sapienza, ; for Australia: Brown et al ., ; Chang and Chopra, ; Neill et al ., ; Uylangco et al ., ; Chang and Wee, ; Foley et al ., ). Limited evidence on the market reaction to trades generally finds a positive reaction to purchases and negative reaction to sales by insiders (for the US: Brochet, ; for the UK: Fidrmuc et al ., ; Brochet, )…”

Section: Introductionmentioning

confidence: 99%

“… The evidence on director trades in Australia focuses on returns around the trade date, that is returns to the trading strategy, rather than the market reaction to the disclosure of the trade (Brown et al ., ; Chang and Chopra, ; Neill et al ., ; Uylangco et al ., ; Chang and Wee, ; Foley et al ., ). …”

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confidence: 99%

The value of ongoing venture capital investment to newly listed firms

Hsu

Owen

Suchard

2019

Accounting & Finance

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We examine whether the market values continuing venture capital (VC) investor involvement in firms post-IPO. Compared to the US, Australian VC investors exit their investments post-IPO by on-market sales rather than distribution of holdings to their investors. Lockup periods tend to be longer and ownership thresholds for reporting trades lower. We find that the market responds positively to buy transactions, negatively to sell transactions of VC investors and negatively to the resignation of VC directors. These results are consistent with VC investors in the firm having a positive influence and creating value from which the VCs and other shareholders benefit.

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“…In fact, prior US research casts doubt over legal insider trades as being informationally neutral (e.g. Seyhun, 1986;Lakonishok and Lee, 2001; Piotroski and Roulstone, 2005;Huddart et al, 2007;Aktas et al, 2008;Griffin et al, 2014), with a growing body of research drawing similar conclusions within Australia (Brown et al, 2003;Hodgson and Van Praag, 2006;Uylangco et al, 2010;Katselas, 2018). Additionally, a recent study by Chang and Wee (2016) shows that the period immediately preceding periodic earnings announcements attract blackout periods stipulated within company-specific trading policies, which prevent otherwise profitable insider trading by directors.…”

Section: Introductionmentioning

confidence: 99%

Strategic insider trading around earnings announcements in Australia

Katselas

2019

Accounting & Finance

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This paper tests, within the Australian setting, whether directors strategically time trades in their own firms, around earnings announcements, in the context of impediments to trading in the immediately preceding period. I show that both signed and unsigned trade activity are insignificantly different from zero in the preceding period, and significantly negative and positive after the event. Further, directors in Australia significantly sell following positive earnings news, and buy after negative news, providing evidence of ‘indirect’ trading. Directors’ trades in the longer‐term pre‐announcement period are also negatively related to the news content sentiment, contrary to expectation. Finally, I find evidence of positive autocorrelation between directors’ trades over the longer‐term past, and those executed after earnings announcements, which, in the absence of the ‘short‐swing’ rule in Australia, casts doubt over short‐term strategic insider trading, more generally.

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The equity and efficiency of the Australian share market with respect to director trading

Cited by 15 publications

References 18 publications

Director trading, or lack thereof, and acquiring firm performance

Director trading, or lack thereof, and acquiring firm performance

The value of ongoing venture capital investment to newly listed firms

Strategic insider trading around earnings announcements in Australia

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