Insider Trading, News Releases and Ownership Concentration

52 Pages Posted: 5 Sep 2005

See all articles by Jana P. Fidrmuc

Jana P. Fidrmuc

Warwick Business School - Finance Group

Marc Goergen

IE Business School, IE University; European Corporate Governance Institute (ECGI)

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Abstract

This paper investigates the market's reaction to UK insider transactions and analyzes whether the reaction depends on the firm's ownership. There are three major findings. First, differences in regulation between the UK and US, in particular the speedier reporting of trades in the UK, may explain the observed larger abnormal returns in the UK. Second, ownership by directors and outside shareholders has an impact on the abnormal returns. Third, it is important to adjust for news released before directors' trades. In particular, trades preceded by news on mergers & acquisitions and CEO replacements contain significantly less information.

Keywords: Insider trading, directors' share dealings, corporate governance, ownership and control

JEL Classification: G14, G39

Suggested Citation

Fidrmuc, Jana P. and Goergen, Marc and Renneboog, Luc, Insider Trading, News Releases and Ownership Concentration. Journal of Finance, 2006, Vol. LXI, No. 6; ECGI - Finance Working Paper No. 93/2005; CentER Discussion Paper Series No. 2005-97. Available at SSRN: https://ssrn.com/abstract=796033

Jana P. Fidrmuc

Warwick Business School - Finance Group ( email )

Warwick Business School
Coventry CV4 7AL
United Kingdom

Marc Goergen

IE Business School, IE University ( email )

Finance Department
Maria de Molina, 12
Madrid, 28006
Spain

HOME PAGE: http://www.ie.edu/business-school/faculty-and-research/faculty/marc-goergen/

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Luc Renneboog (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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