IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/4411.html
   My bibliography  Save this paper

Changes in Equity Ownership and Changes in the Market Value of the Firm

Author

Listed:
  • Servaes, Henri
  • McConnell, John J.

Abstract

We study the stock price response to announcements of share purchases by corporate insiders over the period 1994 through 1999. The cross-sectional variability in the response is consistent with a curvilinear relation between firm value and insider ownership, where the value of the firm first increases, then decreases as insider ownership increases. These results are consistent with a causal interpretation of the relationship between insider ownership and firm value. The results of further tests are inconsistent with an interpretation that the firms in our sample are moving toward a new equilibrium ownership level or that insiders are purchasing shares to signal that the firm is undervalued.

Suggested Citation

  • Servaes, Henri & McConnell, John J., 2004. "Changes in Equity Ownership and Changes in the Market Value of the Firm," CEPR Discussion Papers 4411, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4411
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP4411
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Daniel Ferreira & Emanuel Ornelas & John L. Turner, 2005. "Ownership Structure and the Market for Corporate Control," IBMEC RJ Economics Discussion Papers 2005-09, Economics Research Group, IBMEC Business School - Rio de Janeiro.
    2. Bauguess, Scott W. & Moeller, Sara B. & Schlingemann, Frederik P. & Zutter, Chad J., 2009. "Ownership structure and target returns," Journal of Corporate Finance, Elsevier, vol. 15(1), pages 48-65, February.
    3. Jean Helwege & Christo Pirinsky & René M. Stulz, 2007. "Why Do Firms Become Widely Held? An Analysis of the Dynamics of Corporate Ownership," Journal of Finance, American Finance Association, vol. 62(3), pages 995-1028, June.
    4. Benson, Bradley W. & Davidson III, Wallace N., 2009. "Reexamining the managerial ownership effect on firm value," Journal of Corporate Finance, Elsevier, vol. 15(5), pages 573-586, December.
    5. Khorana, Ajay & Servaes, Henri & Wedge, Lei, 2007. "Portfolio manager ownership and fund performance," Journal of Financial Economics, Elsevier, vol. 85(1), pages 179-204, July.
    6. Tong, Zhenxu, 2008. "Deviations from optimal CEO ownership and firm value," Journal of Banking & Finance, Elsevier, vol. 32(11), pages 2462-2470, November.
    7. Cornelli, Francesca & Li, David, 2006. "Ex Ante Effects of Ex Post Managerial Ownership," CEPR Discussion Papers 5821, C.E.P.R. Discussion Papers.
    8. Karl V. Lins & Francis E. Warnock, 2004. "Corporate governance and the shareholder base," International Finance Discussion Papers 816, Board of Governors of the Federal Reserve System (U.S.).

    More about this item

    Keywords

    Insider ownership; Firm value; Executive stock purchases;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:4411. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.