Do Shareholders Value Insider Trading Laws? International Evidence

Beny, Laura Nyantung

doi:10.2139/ssrn.296111

Cited by 25 publications

(25 citation statements)

References 73 publications

(138 reference statements)

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“…From our simple regressions we conclude that market participants anticipate future enforcement actions by regulatory authorities. Our findings corroborate the conclusion of Beny (2001Beny ( , 2004) that the enactment of insider trading laws matters. We therefore question the focus of the existing literature on the enforcement of insider trading laws.…”

Section: Introductionsupporting

confidence: 91%

Insider Trading Legislation and Acquisition Announcements: Do Laws Matter?

2008

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In this paper we investigate how the enactment and enforcement of insider trading restrictions affect the way in which information about acquisitions is released before the actual acquisition announcement. We analyze a sample with almost 19,000 acquisition announcements from 48 countries. We find that insider trading legislation strongly affects the information revealed to the market in the runup phase before the announcement whereas the impact of subsequent enforcement actions by regulators is much weaker and insignificant in some tests. We conclude that market participants rationally anticipate law enforcement. JEL classifications: G14, G34, K22, K42Keywords: Insider Trading, Mergers and Acquisitions, Securities Law, Law and Finance * We are grateful to Laura Beny, Jochen Bigus, Arturo Bris, Ingolf Dittmann, Lars-Hendrik Röller, Karin Thorburn, David Yermack, two anonymous referees, and to seminar participants at Erasmus University, the University of Exeter, the Hong Kong University of Science and Technology, Humboldt University, ParisDauphine, the German Finance Association meetings in Augsburg, the SFB-TR conference in Mannheim, and the European Finance Association meetings in Zürich for comments and discussions. We also wish to express our gratitude to the Rudolf von Bennigsen-Foerder Foundation, the Collaborative Research Center 649 "Economic Risk" in Berlin, the SFB 504 "Rationality Concepts, Decision Making and Economic Modeling" in Mannheim, and the SFB/TR 15 "Governance and the Efficiency of Economic Systems" for financial support. countries. We find that insider trading legislation strongly affects the information revealed to the market in the runup phase before the announcement whereas the impact of subsequent enforcement actions by regulators is much weaker and insignificant in some tests. We conclude that market participants rationally anticipate law enforcement.JEL classifications: G14, G34, K22, K42

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Section: Introductionsupporting

confidence: 91%

Insider Trading Legislation and Acquisition Announcements: Do Laws Matter?

2008

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“…However, in Beny (2001), I present evidence that insider trading laws are positively associated with valuation even in firms in which ownership tends to be concentrated.…”

mentioning

confidence: 81%

“…For instance, insider trading laws might be more lax in countries in which ownership is more concentrated because, as I argue in Beny (2001), there might be fewer opportunities for profitable insider trading in firms with concentrated ownership.…”

mentioning

confidence: 98%

A Comparative Empirical Investigation of Agency and Market Theories of Insider Trading

Beny

2004

SSRN Journal

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The paper summarizes various agency cost and market theories of insider trading propounded over the course of the perennial law and economics debate over insider trading. The paper then suggests three testable hypotheses regarding the relationship between insider trading laws and several measures of financial performance. Using international data and alternative regression specifications, the paper finds that more stringent insider trading laws and enforcement are generally associated with greater ownership dispersion, greater stock price accuracy and greater stock market liquidity. This set of findings provides empirical support to theoretical arguments in favor of more stringent insider trading legislation and enforcement.

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“…If insider trading ) increases the conflict between minority shareholders (outsiders) and managers and/or controlling shareholders (insiders), an effective regulation should reduce agency costs and therefore increase firm value, even though the literature is not unanimous on the negative role of insider trading in the agency relationship (Beny 2008 Beny (2008) finds indeed that, in common law countries, stricter insider-trading regulation and enforcement do increase firm value. However, the same result is not found in civil law countries, where, Beny (2008: 292) notes, 'investor protections are relatively weaker'.…”

Section: Introductionmentioning

confidence: 99%

“…However, the same result is not found in civil law countries, where, Beny (2008: 292) notes, 'investor protections are relatively weaker'. Therefore, the effectiveness of insider trading regulation may depend on the institutional context (Beny, 2008).…”

Section: Introductionmentioning

confidence: 99%

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

2016

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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.

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Do Shareholders Value Insider Trading Laws? International Evidence

Cited by 25 publications

References 73 publications

Insider Trading Legislation and Acquisition Announcements: Do Laws Matter?

Insider Trading Legislation and Acquisition Announcements: Do Laws Matter?

A Comparative Empirical Investigation of Agency and Market Theories of Insider Trading

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

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