Informed trading by non-financial companies
Journal article, Peer reviewed
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- SAM - Handelshøyskolen 
Original versionFjesme SLF. Informed trading by non-financial companies. Applied Economics Letters. 2019 http://dx.doi.org/10.1080/13504851.2019.1613489
It is well documented in the finance literature how share prices go up when companies increase dividend payouts. The long-term trend, however, is that more companies now retain excess cash rather than paying dividends. In this paper I investigate if companies retain cash to invest on private information in domestic stock markets. I look at 20,620 domestic non-financial companies trading shares on the Oslo Stock Exchange (OSE) over the period 1993 to 2006. I find that companies earn excess risk-adjusted-returns from active trading. I conclude that companies retain at least some cash to take advantage of private information.