The Determinants and Value Impact of Regulatory Compliance: An Analysis of Insider Trading Disclosures

Abstract

This paper investigates the determinants of regulatory compliance and its effect on informational efficiency. Exploiting a unique enforcement and reporting framework for corporate insider trading in Italy, we present three main findings. First, board governance, such as chief executive-chairman duality and the proportion of non-executive directors, does not increase the propensity of firms to comply with regulation. Second, firms with concentrated ownership and control, together with those run by families and cooperatives are most likely to comply with regulation. Third, the market responds less to reporting by fully compliant firms and those with strong family control.

Keywords: Regulatory Compliance, Corporate Governance, Corporate Insider Trading, Regulation, Italy, Family Firms

JEL Classification: G14, G38