Directors’ Share Dealings and Company Financial Performance

Abstract

This paper examines the response of security prices to the share dealings by directors of small capitalised firms in the United Kingdom and tests as to whether the share dealings contain information with regard to the firm’s future financial performance. The results of the study indicate that investors respond positively to the information signals of directors’ equity purchases. We find little evidence to suggest that directors’ equity sales possess significant information content. The results suggest that there is a positive association between financial performance and the type of trade directors engage in.