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Insider Trading and the Market Abuse Directive: Are Voluntary and Mandatory Takeover Bids Different?

Author

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  • Riccardo Ferretti

    (University of Modena and Reggio Emilia
    Cefin (Centro Studi Banca e Finanza))

  • Pierpaolo Pattitoni

    (Cefin (Centro Studi Banca e Finanza)
    University of Bologna)

  • Roberto Patuelli

    (University of Bologna, Rimini Campus
    Rimini Centre for Economic Analysis (RCEA))

Abstract

This study analyzes the effectiveness of the Market Abuse Directive (MAD) in reducing possible profits from insider trading during takeover bids. Exploiting the quasi-experimental setting provided by the introduction of the MAD, our event-study analysis on the Italian market suggests that the new regulation did produce effects, for mandatory offers, on the magnitude of abnormal returns and volumes noted before their announcement. Instead, we find no effect for voluntary offers, which prove to be intrinsically different from the latter ones. Multivariate econometric analyses based on regression and matching methods confirm this result. We interpret our results in light of the choice problem of the optimal amount of insider trading, based on the comparison of marginal costs and benefits of the illegal activity, after considering the differences between voluntary and mandatory offers.

Suggested Citation

  • Riccardo Ferretti & Pierpaolo Pattitoni & Roberto Patuelli, 2021. "Insider Trading and the Market Abuse Directive: Are Voluntary and Mandatory Takeover Bids Different?," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 7(3), pages 461-485, November.
    • Handle: RePEc:spr:italej:v:7:y:2021:i:3:d:10.1007_s40797-019-00114-y
    DOI: 10.1007/s40797-019-00114-y
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    Cited by:

    1. Christos Alexakis & Vasileios Pappas & Emmanouil Skarmeas, 2021. "Market abuse under different close price determination mechanisms: A European case," Post-Print hal-03182927, HAL.

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    More about this item

    Keywords

    Market abuse directive; Takeover bids; Event study;
    All these keywords.

    JEL classification:

    • K2 - Law and Economics - - Regulation and Business Law
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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