Legal insider trading and stock market reaction: evidence from the Netherlands

This paper provides an analysis of legal insider trading on the Euronext Amsterdam stock exchange by using data published in the register held by the AFM, the dutch financial markets authority. The sample includes 822 transactions executed by corporate insiders between the beginning of January 1999 and the end of September 2005. Our analysis shows that the financial markets' response is not significant for purchases, and that the abnormal returns associated with the sales do not have the expected sign. However, over a longer time horizon, the average cumulated abnormal returns are positive for the stocks purchased, and negative for stocks sold by insiders. This result suggests either that insiders use long-term information for their trading activities or that they are able to time the market.

Essays on asset-backed securitization the case of industrial firms

Based on a hand collected sample of asset-backed securitizations (ABS) issued by US industrial firms from 1992 to 2006, this dissertation tests a number of issues linked to the economic motivations of ABS financing. The first essay analyzes the impact of ABS usage on corporate investment and performance, providing empirical evidence on the role of ABS in mitigating underinvestment problems within industrial firms. The second essay raises the question how top managers make use of ABS financing in order to achieve their performance targets, and them maximize their own compensation. The third essay focuses on overcollateralization in ABS transactions by investigating its determinants and impact on working capital management policy.(IAG 3) -- UCL, 201

Investment, firm performance and securitization: Evidence from industrial companies

Asset-backed securitization (ABS) can generate substantial cash inflows to the firm and thus a worthwhile source of financing when other sources become very costly. Using a hand collected sample of ABS transactions done in the US, we estimate the sensitivity to ABS proceeds of both investment and firm’s performance, arguing that if both investment and firm’s performance are increasing in ABS cash flow, this will be consistent with the underinvestment mitigation hypothesis. Alternatively, if ABS activity leads to increasing investment and decreasing firm’s performance, this will provide support to the overinvestment hypothesis. Consistent with the first hypothesis, we find that ABS proceeds are associated with more investment and better market performance in firms with high financial distress probability. Furthermore, after exploring other uses of ABS proceeds, we show that high-growth firms mainly use ABS to finance their acquisitions while low-growth firms spend ABS proceeds to increase both investment and stock repurchases, which allows them to signal to the market the improvement of their growth prospects

Securitization of corporate assets and executive compensation

We examine the effect of corporate asset-backed securitization on managerial compensation. We find that CEO compensation increases after securitization of corporate assets, which is consistent with two distinct theoretical views: (1) asset-backed securitization improves the efficiency of performance-based compensation as corporate performance becomes a better signal of managerial effort and (2) securitization of corporate assets mitigates liquidity constraints so that firms can make more efficient investments. We find that securitization primarily affects short-term accounting components (bonuses) and less equity-based components of the CEO's performance-based compensation. Further investigation reveals support for the second view of liquidity but not the first view of moral hazard. The results are robust to controlling for both possible self-selection biases associated with the decision to rely on asset-backed securitization as a means of external financing and simultaneity between executive compensation and financial decisions (securitization and leverage)

Legal insider trading, stock market reaction: evidence from the Netherlands.

This paper provides an analysis of legal insider trading on the Euronext Amsterdam stock exchange by using data published in the register held by the AFM, the dutch financial markets authority. The sample includes 822 transactions executed by corporate insiders between the beginning of January 1999 and the end of September 2005. Our analysis shows that the financial markets' response is not significant for purchases, and that the abnormal returns associated with the sales do not have the expected sign. However, over a longer time horizon, the average cumulated abnormal returns are positive for the stocks purchased, and negative for stocks sold by insiders. This result suggests either that insiders use long-term information for their trading activities or that they are able to time the market