Insider Trading, Option Exercises and Private Benefits of Control

Research output: Working paperDiscussion paperOther research output

Abstract

We investigate patterns of abnormal stock performance around insider trades and option exercises on the Dutch market. Listed firms in the Netherlands have a long tradition of employing many anti-shareholder mechanisms limiting shareholders rights. Our results imply that insider transactions are more profitable at firms where shareholder rights are not restricted by anti-shareholder mechanisms. This finding goes against the monitoring hypothesis which states that more shareholder orientation and stronger blockholders would reduce the gains from insider trading. We show robust support for the substitution hypothesis as insiders of firms which effectively curtail shareholder rights enjoy valuable private benefits of control in lieu of engaging in insider trading to exploit their position.
Original languageEnglish
Place of PublicationTilburg
PublisherTILEC
Number of pages60
Volume2010-015
Publication statusPublished - 2010

Publication series

NameTILEC Discussion Paper
Volume2010-015

Fingerprint

Private benefits of control
Shareholder rights
Exercise
Insider
Shareholders
Insider trading
Blockholders
Stock performance
Substitution
Monitoring
The Netherlands

Keywords

  • insider trading
  • management stock options
  • timing by insiders
  • corporate governance
  • antishareholder

Cite this

Cziraki, P., de Goeij, P. C., & Renneboog, L. D. R. (2010). Insider Trading, Option Exercises and Private Benefits of Control. (TILEC Discussion Paper; Vol. 2010-015). Tilburg: TILEC.
@techreport{2d1e16a840de468ea7711b6bfdb6171b,
title = "Insider Trading, Option Exercises and Private Benefits of Control",
abstract = "We investigate patterns of abnormal stock performance around insider trades and option exercises on the Dutch market. Listed firms in the Netherlands have a long tradition of employing many anti-shareholder mechanisms limiting shareholders rights. Our results imply that insider transactions are more profitable at firms where shareholder rights are not restricted by anti-shareholder mechanisms. This finding goes against the monitoring hypothesis which states that more shareholder orientation and stronger blockholders would reduce the gains from insider trading. We show robust support for the substitution hypothesis as insiders of firms which effectively curtail shareholder rights enjoy valuable private benefits of control in lieu of engaging in insider trading to exploit their position.",
keywords = "insider trading, management stock options, timing by insiders, corporate governance, antishareholder",
author = "P. Cziraki and {de Goeij}, {P. C.} and L.D.R. Renneboog",
note = "Pagination: 60",
year = "2010",
language = "English",
volume = "2010-015",
series = "TILEC Discussion Paper",
publisher = "TILEC",
type = "WorkingPaper",
institution = "TILEC",

}

Cziraki, P, de Goeij, PC & Renneboog, LDR 2010 'Insider Trading, Option Exercises and Private Benefits of Control' TILEC Discussion Paper, vol. 2010-015, TILEC, Tilburg.

Insider Trading, Option Exercises and Private Benefits of Control. / Cziraki, P.; de Goeij, P. C.; Renneboog, L.D.R.

Tilburg : TILEC, 2010. (TILEC Discussion Paper; Vol. 2010-015).

Research output: Working paperDiscussion paperOther research output

TY - UNPB

T1 - Insider Trading, Option Exercises and Private Benefits of Control

AU - Cziraki, P.

AU - de Goeij, P. C.

AU - Renneboog, L.D.R.

N1 - Pagination: 60

PY - 2010

Y1 - 2010

N2 - We investigate patterns of abnormal stock performance around insider trades and option exercises on the Dutch market. Listed firms in the Netherlands have a long tradition of employing many anti-shareholder mechanisms limiting shareholders rights. Our results imply that insider transactions are more profitable at firms where shareholder rights are not restricted by anti-shareholder mechanisms. This finding goes against the monitoring hypothesis which states that more shareholder orientation and stronger blockholders would reduce the gains from insider trading. We show robust support for the substitution hypothesis as insiders of firms which effectively curtail shareholder rights enjoy valuable private benefits of control in lieu of engaging in insider trading to exploit their position.

AB - We investigate patterns of abnormal stock performance around insider trades and option exercises on the Dutch market. Listed firms in the Netherlands have a long tradition of employing many anti-shareholder mechanisms limiting shareholders rights. Our results imply that insider transactions are more profitable at firms where shareholder rights are not restricted by anti-shareholder mechanisms. This finding goes against the monitoring hypothesis which states that more shareholder orientation and stronger blockholders would reduce the gains from insider trading. We show robust support for the substitution hypothesis as insiders of firms which effectively curtail shareholder rights enjoy valuable private benefits of control in lieu of engaging in insider trading to exploit their position.

KW - insider trading

KW - management stock options

KW - timing by insiders

KW - corporate governance

KW - antishareholder

M3 - Discussion paper

VL - 2010-015

T3 - TILEC Discussion Paper

BT - Insider Trading, Option Exercises and Private Benefits of Control

PB - TILEC

CY - Tilburg

ER -