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Insider Selling and IPO Price Premium

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  • Chunhua Chen
  • Tianze Li
  • Yingqi Li
  • Steven Xiaofan Zheng

Abstract

We examine insider selling for initial public offering (IPO) firms using a sample of 1868 IPOs between 1988 and 2012. We find that overvalued IPOs have higher probability of offering secondary shares, higher proportion of secondary shares offered, and more upward revision in the total number of shares offered. They also have higher probability of insider sale in the open market both before and after lockup expiration. The size of insider sale in the open market also increases with the degree of overvaluation. The results are consistent with the hypothesis that IPO insiders try to sell their shares opportunistically into overvalued markets.

Suggested Citation

  • Chunhua Chen & Tianze Li & Yingqi Li & Steven Xiaofan Zheng, 2018. "Insider Selling and IPO Price Premium," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(15), pages 3500-3518, December.
    • Handle: RePEc:mes:emfitr:v:54:y:2018:i:15:p:3500-3518
    DOI: 10.1080/1540496X.2018.1435416
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