An Empirical Analysis of Legal Insider Trading in the Netherlands

CentER Discussion Paper Series No. 2009-48

TILEC Discussion Paper No. 2009-026

49 Pages Posted: 16 Feb 2009 Last revised: 29 Jun 2009

Hans Degryse

KU Leuven, Department Accounting, Finance and Insurance; Centre for Economic Policy Research (CEPR)

Frank De Jong

Tilburg University - Department of Finance

Jérémie Lefebvre

IESEG School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: June 15, 2009

Abstract

In this paper, we employ a registry of legal insider trading for Dutch listed firms to investigate the information content of the trades by corporate insiders. Using the 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 executives 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.

Keywords: Insider trading, Financial market regulation

JEL Classification: G14, G28, K22

Suggested Citation

Degryse, Hans and De Jong, Frank and Lefebvre, Jérémie, An Empirical Analysis of Legal Insider Trading in the Netherlands (June 15, 2009). CentER Discussion Paper Series No. 2009-48; TILEC Discussion Paper No. 2009-026. Available at SSRN: https://ssrn.com/abstract=1343487 or http://dx.doi.org/10.2139/ssrn.1343487

Hans Degryse

KU Leuven, Department Accounting, Finance and Insurance ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Frank De Jong

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Jérémie Lefebvre (Contact Author)

IESEG School of Management ( email )

3 Rue de la Digue
Lille, 59000
France

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