Insider Trading and the Market Abuse Directive: Are Voluntary and Mandatory Takeover Bids Different?

Italian Economic Journal, Forthcoming

36 Pages Posted: 16 Oct 2019

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

Date Written: October 6, 2019

Abstract

This study analyzes the effectiveness of the Market Abuse Directive (MAD) in reducing possible profits from insider trading during takeover bids. 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 produce effects, for mandatory offers, on the magnitude of abnormal returns and volumes noted before their announcement. Instead, we find no effect for voluntary offers, which prove to be intrinsically different from the latter ones. Multivariate econometric analyses based on regression and matching methods confirm this result. We interpret our results in light of the choice problem of the optimal amount of insider trading, based on the comparison of marginal costs and benefits of the illegal activity, after considering the differences between voluntary and mandatory offers.

Keywords: Market Abuse Directive, Takeover bids, Event study

JEL Classification: K2, K4, G34, G14

Suggested Citation

Ferretti, Riccardo and Pattitoni, Pierpaolo and Patuelli, Roberto, Insider Trading and the Market Abuse Directive: Are Voluntary and Mandatory Takeover Bids Different? (October 6, 2019). Italian Economic Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3465144

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/

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

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

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