Going private restructuring: the role of insider trading

Insiders take their companies private to exploit their knowledge of the true value of the firms. Proof of this motivation is the pattern of abnormal net-buying engaged by insiders of companies taken private by management before the decision to go private is announced. This activity does not occur in companies taken private by a third party. Another proof is the inconsistency of the relationship between insider trading and the level of free cash as well as past tax liabilities.