Insider Trading, Option Exercises and Private Benefits of Control
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 antishareholder 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 Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 1006.
Length: 63 pages
Date of creation: Mar 2010
Date of revision:
insider trading; management stock options; timing by insiders; corporate governance; antishareholder mechanisms; anti-takeover mechanisms;
Other versions of this item:
- Cziraki, P. & Goeij, P. C. de & Renneboog, L.D.R., 2010. "Insider Trading, Option Exercises and Private Benefits of Control," Discussion Paper 2010-015, Tilburg University, Tilburg Law and Economic Center.
- 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-2010-04-24 (All new papers)
- NEP-BEC-2010-04-24 (Business Economics)
- NEP-MST-2010-04-24 (Market Microstructure)
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- : Jana P. Fidrmuc & Adriana Korczak & Piotr Korczak, 2012.
"Why does Shareholder Protection Matter for Abnormal Returns after Reported Insider Purcases and Sales?,"
wpn12-03, Warwick Business School, Finance Group.
- Fidrmuc, Jana P. & Korczak, Adriana & Korczak, Piotr, 2013. "Why does shareholder protection matter for abnormal returns after reported insider purchases and sales?," Journal of Banking & Finance, Elsevier, vol. 37(6), pages 1915-1935.
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