
doi: 10.2139/ssrn.1496943
The article is devoted to the insider’s qualification, reputation and motivation as the shareholders’ value drivers. Using my personal experience and the theoretical analysis I came to the conclusion that any insider’s activity can be treated as value creative or value destructive depending on the market’s attitude to the insider’s personality, estimation of his qualification and motivation. This effect was called «the signaling inversion”. In accordance to this point I worked out a simple model which shows that insider’s activity can be counted as value enhancing if in prevailing opinions more than 2/3 of his investment and financial decisions are made in shareholders’ best interests. In addition to it, the model proves the impossibility of the insider’s value-based motivation in the absence of the responsibility for the wrong decisions, particularly for the acceptance of value destroying projects. Conclusions contain some indirect evidences of the signaling inversion effect.
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