A Test of Managerial Discretion and Market Efficiency in the Public Venture Capital Industry

Authors

  • Hannah Rozen Fairleigh Dickinson University
  • Sarah Hertz Empire State College State University of New York

DOI:

https://doi.org/10.33423/jabe.v21i3.2084

Keywords:

Business, Economics, institutional investors, stakeholders, Managerial Discretion, Market Efficiency, Public Venture Capital Industry

Abstract

In the public venture capital industry, firms are owned by institutional investors and other stakeholders possessing inside information that may lead to the leakage of company news before an event actually occurs. Using an event study, we examine the potential effect insiders have on the market through stock trading. We study trading volume, absolute percent changes in trading volume and percent changes in price five days prior and post an important news event. In cases where there is a large increase in trading volume before an event is reported in the news, it is presumed that news leakage has occurred. Furthermore, it is important to analyze whether share prices impound this information rendering the market efficient, or whether prices take time to “catch up” in which case the public venture capital market would be considered only semi-strong efficient.

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Published

2019-07-17

How to Cite

Rozen, H., & Hertz, S. (2019). A Test of Managerial Discretion and Market Efficiency in the Public Venture Capital Industry. Journal of Applied Business and Economics, 21(3). https://doi.org/10.33423/jabe.v21i3.2084

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Section

Articles