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

Author

Listed:
  • Riccardo Ferretti

    (Department of Communication and Economics, and Cefin (Centro Studi Banca e Finanza), University of Modena and Reggio Emilia, Italy)

  • Pierpaolo Pattitoni

    (University of Bologna, Italy; The Rimini Centre for Economic Analysis, Italy)

  • Roberto Patuelli

    (University of Bologna, Italy; The Rimini Centre for Economic Analysis, Italy)

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.

Suggested Citation

  • Riccardo Ferretti & Pierpaolo Pattitoni & Roberto Patuelli, 2016. "Market Abuse Directive and Insider Trading: Evidence from Italian Tender Offers," Working Paper series 16-16, Rimini Centre for Economic Analysis.
    • Handle: RePEc:rim:rimwps:16-16
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    More about this item

    Keywords

    Market Abuse Directive; Tender offer; Delisting; Event study;
    All these keywords.

    JEL classification:

    • K2 - Law and Economics - - Regulation and Business Law
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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