We study a known negative signal, the sale of insider shares in an IPO and find that insiders adopt two concealment strategies consistent with wealth-maximizing behavior. First, insiders underreport the number of personally owned shares in the prominent original prospectus and use an obscure amendment to communicate the true higher level of shares to be offered. Second, when insiders increase shares in a later amendment, they tend to either increase secondary shares disproportional to primary share increases, or to reduce primary shares to wholly or partly conceal the increase in secondary shares offered. Insiders confound the negative secondary share signal by simultaneously sending a positive lockup signal.

Miller and Scholes (1978) hypothesize that the marginal tax rate on dividend income may be less than the marginal rate of tax on capital gains. Their hypothesis is dependent upon individuals utilizing existing provisions of the Code which serve to reduce the taxation of dividends. In this study, estimates of the marginal and effective rates of tax on dividend income for the year 1979 are presented using the Statistics of Income sample of returns. The average marginal rate of tax on dividend income is estimated to be 40%, while the average effective rate of tax is estimated to be 30%.