Abstract
This study examines executives and directors’ motivation to sell their holdings during the IPO process. We find that a strong motivating factor that drive insider selling is consistent with their liquidity needs: insiders sell their shares when they are undercompensated, especially cash compensation. We find that the firms’ cash level directly impacts the executives’ level of cash compensation. In turn, cash compensation inversely impacts insider sales. Additionally, post-IPO lockups increases insider selling. This is consistent with selling based on insider liquidity needs.
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