Insider sales

Sammanfattning: Course: BUSN79 - Degree Project in Accounting and Finance Authors: Simon Nyström, Axel Åkerström Advisor: Reda Moursli Key words: Selling owners, IPO, underpricing, analyst coverage, quiet period Purpose: The purpose of this thesis is to investigate if insider sales in initial public offerings affects the level of underpricing in the Swedish stock market. We further aim to evaluate if prestigious underwriters with affiliated high-quality analysts have a moderating effect on the relationship between insider sales and underpricing. Finally, we aim to investigate if the number of analysts has a moderating effect on the same relationship. Methodology: The methodology is based on a cross-sectional data set which is used for the OLS regressions. Further, an instrumental variable approach is used to account for endogeneity problems. Interaction terms are also included in order to control for the moderating effect. Lastly, robustness checks are done by gradually controlling for different limits for the dummy variables used in interaction terms. Theoretical perspectives: The theories used for the hypotheses development and analysis are information asymmetry, signaling theory, agency theory, the winner's curse hypothesis, the bandwagon hypothesis, the investment banker’s monopsony power hypothesis and the entrepreneurial losses model. Empirical foundation: This thesis uses a final sample of 448 IPOs in the Swedish stock market during the period of 2010-2022. Conclusions: We find that insider sales affect the level of underpricing in a positive direction. However, we do not find evidence that prestigious underwriters with affiliated high-quality analysts have a moderating effect on the relationship between insider sales and underpricing. It is instead the number of analysts that has a moderating negative effect on insider sales and underpricing.