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An Empirical Analysis of Legal Insider Trading in the Netherlands

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  • Degryse, H.A.
  • Jong, F.C.J.M. de
  • Lefebvre, J.J.G.

    (Tilburg University, Center for Economic Research)

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 execu- tives 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.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2009-48.

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Date of creation: 2009
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Handle: RePEc:dgr:kubcen:200948

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Keywords: Insider trading; Financial market regulation;

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Citations

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Cited by:
  1. Kaspar Dardas & Andre Güttler, 2011. "Are directors’ dealings informative? Evidence from European stock markets," Financial Markets and Portfolio Management, Springer, vol. 25(2), pages 111-148, June.
  2. Nicholas Dorn, 2011. "The metamorphosis of insider trading in the face of regulatory enforcement," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 19(1), pages 75-84, February.

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