An empirical analysis of legal insider trading in the Netherlands

H.A. Degryse, F.C.J.M. de Jong, J.J.G. Lefebvre

Research output: Contribution to journalArticleScientificpeer-review

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.
Original languageEnglish
Pages (from-to)71-103
JournalDe Economist
Volume162
Issue number1
DOIs
Publication statusPublished - Mar 2014

Fingerprint

Information content
Empirical analysis
Purchase
The Netherlands
Insider trading
Information flow
Event study methodology
Registry
European Union
Stock prices
Insider
Abnormal returns
Market abuse
Market capitalization

Cite this

Degryse, H.A. ; de Jong, F.C.J.M. ; Lefebvre, J.J.G. / An empirical analysis of legal insider trading in the Netherlands. In: De Economist. 2014 ; Vol. 162, No. 1. pp. 71-103.
@article{0fe971106da34c5ba6a8e08b7f1409a9,
title = "An empirical analysis of legal insider trading in the Netherlands",
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.",
author = "H.A. Degryse and {de Jong}, F.C.J.M. and J.J.G. Lefebvre",
year = "2014",
month = "3",
doi = "10.1007/s10645-013-9222-4",
language = "English",
volume = "162",
pages = "71--103",
journal = "De Economist: Tijdschrift voor alle standen, tot bevordering van volkswelvaart, door verspreiding van eenvoudige beginselen van staatshuishoudkunde",
issn = "0013-063X",
publisher = "Springer",
number = "1",

}

An empirical analysis of legal insider trading in the Netherlands. / Degryse, H.A.; de Jong, F.C.J.M.; Lefebvre, J.J.G.

In: De Economist, Vol. 162, No. 1, 03.2014, p. 71-103.

Research output: Contribution to journalArticleScientificpeer-review

TY - JOUR

T1 - An empirical analysis of legal insider trading in the Netherlands

AU - Degryse, H.A.

AU - de Jong, F.C.J.M.

AU - Lefebvre, J.J.G.

PY - 2014/3

Y1 - 2014/3

N2 - 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.

AB - 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.

U2 - 10.1007/s10645-013-9222-4

DO - 10.1007/s10645-013-9222-4

M3 - Article

VL - 162

SP - 71

EP - 103

JO - De Economist: Tijdschrift voor alle standen, tot bevordering van volkswelvaart, door verspreiding van eenvoudige beginselen van staatshuishoudkunde

JF - De Economist: Tijdschrift voor alle standen, tot bevordering van volkswelvaart, door verspreiding van eenvoudige beginselen van staatshuishoudkunde

SN - 0013-063X

IS - 1

ER -