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Same Rules, Different Enforcement : Market Abuse in Europe

Author

Listed:
  • Douglas J. Cumming

    (EM - EMLyon Business School)

  • Alexander Groh
  • Sofia A. Johan

Abstract

We present and analyze a novel set of enforcement data from the European Securities Market Authority during the period following the European Union's harmonized rule setting on securities market abuse. The data show significant differences in the intensity of enforcement across Europe. The empirical tests are highly consistent with the view that the intensity of enforcement is the most statistically robust and economically significant predictor of market abuse detection. In particular, the data identify three important arms of enforcement: the number of supervisors, which enhances detection; formalized cooperation, which facilitates surveillance; and imprisonment, which facilitates deterrence. We discuss research, practitioner implications, and policy implications for securities regulation across several key European countries.

Suggested Citation

  • Douglas J. Cumming & Alexander Groh & Sofia A. Johan, 2018. "Same Rules, Different Enforcement : Market Abuse in Europe," Post-Print hal-02312132, HAL.
    • Handle: RePEc:hal:journl:hal-02312132
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    Cited by:

    1. Loban, Lidia & Sarto, José Luis & Vicente, Luis, 2021. "Determinants of non-compliant equity funds with EU portfolio concentration limits," Journal of Multinational Financial Management, Elsevier, vol. 62(C).
    2. Del Gaudio, Belinda L. & Salerno, Dario & Sampagnaro, Gabriele & Verdoliva, Vincenzo, 2022. "Misconduct risk in banking services: Does a propensity to be sanctioned exist?," International Review of Financial Analysis, Elsevier, vol. 81(C).
    3. Ashton, John & Burnett, Tim & Diaz-Rainey, Ivan & Ormosi, Peter, 2021. "Known unknowns: How much financial misconduct is detected and deterred?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 74(C).
    4. Sane, Renuka, 2019. "Stock market trading in the aftermath of an accounting scandal," Emerging Markets Review, Elsevier, vol. 40(C), pages 1-1.
    5. Dissanaike, Gishan & Drobetz, Wolfgang & Momtaz, Paul P. & Rocholl, Jörg, 2021. "The Economics of Law Enforcement: Quasi-Experimental Evidence from Corporate Takeover Law," Journal of Corporate Finance, Elsevier, vol. 67(C).
    6. Anolick, Nina & Batten, Jonathan A. & Kinateder, Harald & Wagner, Niklas, 2021. "Time for gift giving: Abnormal share repurchase returns and uncertainty," Journal of Corporate Finance, Elsevier, vol. 66(C).
    7. Ouyang, Liangyi & Cao, Bolong, 2020. "Selective pump-and-dump: The manipulation of their top holdings by Chinese mutual funds around quarter-ends," Emerging Markets Review, Elsevier, vol. 44(C).
    8. Loban, Lidia & Sarto, José Luis & Vicente, Luis, 2020. "Eurozone regulation bias in the active share measure," International Review of Financial Analysis, Elsevier, vol. 72(C).
    9. Cline, Brandon N. & Williamson, Claudia R. & Xiong, Haoyang, 2021. "Culture and the regulation of insider trading across countries," Journal of Corporate Finance, Elsevier, vol. 67(C).
    10. Bernales, Alejandro & Beuermann, Diether W. & Cumming, Douglas & Olid, Christian, 2023. "Blue-Collar Crime and Finance," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 83(C).
    11. Aghanya, Daniel & Agarwal, Vineet & Poshakwale, Sunil, 2020. "Market in Financial Instruments Directive (MiFID), stock price informativeness and liquidity," Journal of Banking & Finance, Elsevier, vol. 113(C).
    12. Batten, Jonathan A. & Lončarski, Igor & Szilagyi, Peter G., 2021. "Strategic insider trading in foreign exchange markets," Journal of Corporate Finance, Elsevier, vol. 69(C).
    13. Cumming, Douglas & Johan, Sofia, 2019. "Capital-market effects of securities regulation: Prior conditions, implementation, and enforcement revisited," Finance Research Letters, Elsevier, vol. 31(C).
    14. Cline, Brandon N. & Posylnaya, Valeriya V., 2019. "Illegal insider trading: Commission and SEC detection," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 247-269.
    15. Laure Batz, 2023. "Financial market enforcement in France," European Journal of Law and Economics, Springer, vol. 55(3), pages 409-468, June.
    16. Douglas Cumming & Sofia Johan & Denis Schweizer, 2017. "Information systems, agency problems, and fraud," Information Systems Frontiers, Springer, vol. 19(3), pages 421-424, June.

    More about this item

    Keywords

    Securities Regulation; Enforcement; Law and Finance;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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