Corporate governance rules and insider trading profits

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We investigate patterns of abnormal stock performance around insider trades on the Dutch market. Listed firms in the Netherlands have a long tradition of limiting shareholders’ rights. Using a change in corporate governance regulations as a natural experiment, we show that governance rules have a causal effect on insider trading profits. Our results imply that insider transactions are more profitable at firms where shareholder rights are not restricted by antishareholder mechanisms. These findings are inconsistent with internal monitoring of insider trading. Rather, we explain this empirical pattern by imperfect substitution between insider trading profits and other private benefits of control.
Original languageEnglish
Pages (from-to)67-108
JournalReview of Finance
Volume18
Issue number1
DOIs
Publication statusPublished - 2014

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Corporate governance
Profit
Insider trading
Shareholder rights
Insider
Governance
Stock performance
Private benefits of control
Substitution
Causal effect
Monitoring
Natural experiment
The Netherlands

Cite this

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title = "Corporate governance rules and insider trading profits",
abstract = "We investigate patterns of abnormal stock performance around insider trades on the Dutch market. Listed firms in the Netherlands have a long tradition of limiting shareholders’ rights. Using a change in corporate governance regulations as a natural experiment, we show that governance rules have a causal effect on insider trading profits. Our results imply that insider transactions are more profitable at firms where shareholder rights are not restricted by antishareholder mechanisms. These findings are inconsistent with internal monitoring of insider trading. Rather, we explain this empirical pattern by imperfect substitution between insider trading profits and other private benefits of control.",
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Corporate governance rules and insider trading profits. / Cziraki, P.; de Goeij, P.C.; Renneboog, L.D.R.

In: Review of Finance, Vol. 18, No. 1, 2014, p. 67-108.

Research output: Contribution to journalArticleScientificpeer-review

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