Market Abuse Directive and Insider Trading: Evidence from Italian Tender Offers

Quaderni - Working Paper DSE N° 1071

45 Pages Posted: 10 Jun 2016

See all articles by Riccardo Ferretti

Riccardo Ferretti

Università di Modena e Reggio Emilia - Dipartimento di Comunicazione e Economia

Pierpaolo Pattitoni

University of Bologna - Department of Statistical Sciences ; University of Bologna - Rimini Center for Economic Analysis (RCEA)

Roberto Patuelli

University of Bologna - Department of Economics

Date Written: June 8, 2016

Abstract

This study analyzes the effectiveness of the Market Abuse Directive (MAD) in reducing possible profits from insider trading during voluntary tender offers with the purpose of delisting initiated by controlling shareholders. Exploiting the quasi-experimental setting provided by the introduction of the MAD, our event-study analysis on the Italian market suggests that the new regulation did not produce appreciable effects on the magnitude of abnormal returns and volumes noted before the announcement of a tender offer. Multivariate econometric analyses based on regression and matching methods confirm this result. However, poolability tests reveal that the MAD has changed the manner in which corporate characteristics influence the capacity of insiders to make profit. We interpret our results considering the choice problem of the optimal amount of insider trading, when comparing the marginal costs and benefits of the illegal activity.

Keywords: Market Abuse Directive, Tender offer, Delisting, Event study

JEL Classification: K2, K4, G34, G14

Suggested Citation

Ferretti, Riccardo and Pattitoni, Pierpaolo and Patuelli, Roberto, Market Abuse Directive and Insider Trading: Evidence from Italian Tender Offers (June 8, 2016). Quaderni - Working Paper DSE N° 1071, Available at SSRN: https://ssrn.com/abstract=2792198 or http://dx.doi.org/10.2139/ssrn.2792198

Riccardo Ferretti (Contact Author)

Università di Modena e Reggio Emilia - Dipartimento di Comunicazione e Economia ( email )

Viale Allegri, 9
Reggio Emilia, Modena 42121
Italy

Pierpaolo Pattitoni

University of Bologna - Department of Statistical Sciences ( email )

Via Belle Arti 41
Bologna, 40126
Italy

University of Bologna - Rimini Center for Economic Analysis (RCEA) ( email )

Via Patara, 3
Rimini (RN), RN 47900
Italy

Roberto Patuelli

University of Bologna - Department of Economics ( email )

via Anghera' 22
Rimini, 47921
Italy
+39-0541-434276 (Phone)
+39-02-700419665 (Fax)

HOME PAGE: http://https://sites.google.com/site/patuellihomepage/

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