Corporate Insider Trading and the Short-Run Price Impact of Private Information in Continental Europe

Abstract

We analyze the stock price behavior around the disclosure of corporate insider transactions. Our sample consists of 1,242 public traded companies located in seven (continental) European countries. We document that insider's reveal information to the public through their trading activities and that they act as contrarian investors. They are timing their trades in buying shares after stock price declines and in selling shares after stock price augmentations. This general observation is mainly driven by German law countries and declines over time. We also show that parameters like transaction size and firm size significantly influences the price impact of insider trades.

Keywords: Insider trading, private and public information, firm valuation, disclosure requirements, Europe

JEL Classification: D82, G14, G15