An Empirical Analysis of Legal Insider Trading in the Netherlands

53 Pages Posted: 10 Jul 2009

See all articles by Hans Degryse

Hans Degryse

KU Leuven - Faculty of Business and Economics (FEB)

Frank De Jong

Tilburg University - Department of Finance

Jérémie Lefebvre

IESEG School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: June 2009

Abstract

In this paper, we employ a registry of legal insider trading for Dutch listed firms to investigate the information content of trades by corporate insiders. Using a standard event-study methodology, we examine short-term stock price behavior around trades. We find that purchases are followed by economically large abnormal returns. This result is strongest for purchases by top executives and for small market capitalization firms, which is consistent with the hypothesis that legal insider trading is an important channel through which information flows to the market. We analyze also the impact of the implementation of the Market Abuse Directive (European Union Directive 2003/6/EC), which strengthens the existing regulation in the Netherlands. We show that the new regulation reduced the information content of sales by top executives.

Keywords: insider trading, financial market regulation

JEL Classification: G14, G28, K22

Suggested Citation

Degryse, Hans and De Jong, Frank and Lefebvre, Jérémie, An Empirical Analysis of Legal Insider Trading in the Netherlands (June 2009). CESifo Working Paper Series No. 2687, Available at SSRN: https://ssrn.com/abstract=1430283 or http://dx.doi.org/10.2139/ssrn.1430283

Hans Degryse

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Frank De Jong

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Jérémie Lefebvre (Contact Author)

IESEG School of Management ( email )

3 Rue de la Digue
Lille, 59000
France

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