Informed Trading Before Seasoned Equity Offerings

Lim, Byungkwon; Yoon, Pyung Sig

doi:2017.46.1.133

Korean J Financ Stud > Volume 46(1); 2017 > Article

Korean Journal of Financial Studies 2017;46(1):133-157.
DOI: https://doi.org/10.26845/KJFS.2017.02.46.1.133 Published online February 28, 2017.

Informed Trading Before Seasoned Equity Offerings

Byungkwon Lim, Pyung Sig Yoon

유상증자 공시 전 정보거래에 관한 연구

임병권, 윤평식

Abstract

This paper investigates informed trading by investors around the announcement of seasoned equity offerings (SEOs). When firms issue their shares, certain parties such as underwriters can review the information provided for the SEOs before it is publicly released. We find that all investors (institutional investors, foreign investors, and individual investors) show abnormally high trading volume prior to the announcement of SEOs. However, only institutional investors show selling trade imbalances compared to past trading patterns. Futhermore, we find that there is a trading behavior of institutional investors toward net selling before the announcement of SEOs. These findings are consistent with our understanding that institutional investors obtain the information prior to the announcement of SEOs. In order to increase the transparency of capital markets, improvements in regulation to monitor how information may be illegally shared is required.

Key Words: 거래불균형,기관투자자,유상증자,정보거래,정보유출,Information Leakage,Informed Trading,Institutional Investor,Seasoned Equity Offerings,Trade Imbalance