Insider Trading, Option Exercises and Private Benefits of Control (Revision of DP 2010-32)
AbstractWe investigate patterns of abnormal stock performance around insider trades and option exercises on the Dutch market. Listed firms in the Netherlands have a long tradition of employing many anti-shareholder mechanisms limiting shareholders rights. Our results imply that insider transactions are more profitable at firms where shareholder rights are not restricted by anti-shareholder mechanisms. This finding goes against the monitoring hypothesis which states that more shareholder orientation and stronger blockholders would reduce the gains from insider trading. We show robust support for the substitution hypothesis as insiders of firms which effectively curtail shareholder rights enjoy valuable private benefits of control in lieu of engaging in insider trading to exploit their position.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2010-90.
Date of creation: 2010
Date of revision:
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Web page: http://center.uvt.nl
insider trading; management stock options; timing by insiders; corporate governance; anti-shareholder mechanisms; anti-takeover mechanisms;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-11 (All new papers)
- NEP-BEC-2010-09-11 (Business Economics)
- NEP-MST-2010-09-11 (Market Microstructure)
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