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An Empirical Analysis of Legal Insider Trading in the Netherlands

Author

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  • Hans Degryse
  • Frank de Jong
  • Jérémie Lefebvre

Abstract

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

Suggested Citation

  • Hans Degryse & Frank de Jong & Jérémie Lefebvre, 2009. "An Empirical Analysis of Legal Insider Trading in the Netherlands," CESifo Working Paper Series 2687, CESifo.
    • Handle: RePEc:ces:ceswps:_2687
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Hans Degryse & Frank Jong & Jérémie Lefebvre, 2016. "Legal Insider Trading and Stock Market Liquidity," De Economist, Springer, vol. 164(1), pages 83-104, March.
    2. Cziraki, P. & de Goeij, P. C. & Renneboog, L.D.R., 2010. "Insider Trading, Option Exercises and Private Benefits of Control (Revision of DP 2010-32)," Discussion Paper 2010-90, Tilburg University, Center for Economic Research.
    3. Chirkova, Elena (Чиркова, Елена) & Petrov, Vladislav (Петров, Владислав), 2015. "The Diagnosis of the Insider Trading During the Conflict of Shareholders of “VimpelCom” in 2005-2013 [Диагностирование Инсайдерской Торговли В Период Конфликта Акционеров Оао «Вымпелком» В 2005—201," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 2, pages 151-173.
    4. Michael Funke & Marc Gronwald, 2009. "A Convex Hull Approach to Counterfactual Analysis of Trade Openness and Growth," CESifo Working Paper Series 2692, CESifo.
    5. Lefebvre, Jérémie & Mazza, Paolo, 2023. "Advance disclosure of insider transactions: Empirical evidence from the Vietnamese stock market," International Review of Law and Economics, Elsevier, vol. 74(C).
    6. Nicholas Dorn, 2011. "The metamorphosis of insider trading in the face of regulatory enforcement," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 19(1), pages 75-84, February.
    7. Marius Cristian Milos & Laura Raisa Milos, 2017. "Regulation, Insider Trading And Stock Market Reaction. What Do We Know?," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 174-179, December.
    8. Kaspar Dardas & Andre Güttler, 2011. "Are directors’ dealings informative? Evidence from European stock markets," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 25(2), pages 111-148, June.
    9. Dagmar Linnertová & Oleg Deev, 2015. "Insider Trading Activities and Returns of German Blue Chips," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 63(6), pages 1995-2003.
    10. Peter Cziraki & Prof. Dr. Luc Renneboog & Peter de Goeij, 2010. "Insider Trading, Option Exercises and Private Benefits of Control," CERS-IE WORKING PAPERS 1006, Institute of Economics, Centre for Economic and Regional Studies.
    11. Debby Van Geyt & Philippe Van Cauwenberge & Heidi Vander Bauwhede, 2013. "The impact of the financial crisis on insider trading profitability in Belgium," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 14(2), pages 364-385, April.
    12. Li, Jie & Zhang, Yongjie & Wang, Lidan, 2021. "Information transmission between large shareholders and stock volatility," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).

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    More about this item

    Keywords

    insider trading; financial market regulation;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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