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Managerial actions and stock transactions during financial distress: Some empirical evidence

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  • Zahid Iqbal
  • Dan French

Abstract

Should the current managers remain in control of the firm during financial distress? We address this issue by examining whether managers who take value-maximizing actions also refrain from abnormal selling of their own shares in the firm. Our empirical results show that managers in the action firms do not engage in abnormal selling even during periods of frequent earnings losses. These managers exhibit higher net purchases than the nonaction managers. Thus, trading behavior of the managers and the actions taken during poor performance both appear to be consistent with stockholder interests. Copyright Springer 2005

Suggested Citation

  • Zahid Iqbal & Dan French, 2005. "Managerial actions and stock transactions during financial distress: Some empirical evidence," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 29(2), pages 154-171, June.
    • Handle: RePEc:spr:jecfin:v:29:y:2005:i:2:p:154-171
    DOI: 10.1007/BF02761551
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    References listed on IDEAS

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    1. repec:bla:jfinan:v:53:y:1998:i:2:p:701-716 is not listed on IDEAS
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    4. John, Kose & Lang, Larry H P & Netter, Jeffry, 1992. "The Voluntary Restructuring of Large Firms in Response to Performance Decline," Journal of Finance, American Finance Association, vol. 47(3), pages 891-917, July.
    5. Yur-Austin, Jasmine, 1998. "Can insiders bail themselves out before private renegotiation?," Review of Financial Economics, Elsevier, vol. 7(2), pages 197-211.
    6. Khanna, Naveen & Poulsen, Annette B, 1995. "Managers of Financially Distressed Firms: Villains or Scapegoats?," Journal of Finance, American Finance Association, vol. 50(3), pages 919-940, July.
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    Cited by:

    1. Lars Schweizer & Andreas Nienhaus, 2017. "Corporate distress and turnaround: integrating the literature and directing future research," Business Research, Springer;German Academic Association for Business Research, vol. 10(1), pages 3-47, June.
    2. Umair Bin Yousaf & Khalil Jebran & Irfan Ullah, 2024. "Corporate governance and financial distress: A review of the theoretical and empirical literature," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 1627-1679, April.

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