The Impact of Mandatory Closed Periods on Corporate Insider Trading

The Market Abuse Regulation (MAR), implemented in July 2016 across the EU, mandates uniform closed periods, prohibiting insider trading 30 days before earnings announcements. We find a significant reduction in insider trading during these periods in treated countries without prior mandates. Although some trades still occur, they do not appear to be driven by private information. However, treated insiders experience an increase in compensation. Furthermore, information asymmetry rises before earnings announcements, and treated firms experience a decline in institutional ownership. Overall, the study suggests that mandated closed periods do not lead to a wealth transfer from insiders to outsiders, nor do they enhance the information environment. These results underscore the limitations of regulatory one-size-fits-all measures in curbing corporate insider trading.

Keywords: JEL classification: G14, G18, G34, M41, M48 insider trading, blackout periods, closed periods, information asymmetry

JEL Classification: G14, G18, G34, M41, M48

Suggested Citation: Suggested Citation

Brochet, Francois and Korczak, Adriana and Korczak, Piotr and Naranjo, Patricia L., The Impact of Mandatory Closed Periods on Corporate Insider Trading (December 12, 2024). Boston University Questrom School of Business Research Paper No. 5067502, Available at SSRN: https://ssrn.com/abstract=5067502 or http://dx.doi.org/10.2139/ssrn.5067502