Insider Trading and Corporate Governance: The Case of Germany

Abstract

"We analyse transactions by corporate insiders in Germany. We find that insider trades are associated with significant abnormal returns. Insider trades that occur prior to an earnings announcement have a larger impact on prices. This result provides a rationale for the UK regulation that prohibits insiders from trading prior to earnings announcements. Both the ownership structure and the accounting standards used by the firm affect the magnitude of the price reaction. The position of the insider within the firm has no effect, which is inconsistent with the informational hierarchy hypothesis." Copyright (c) 2007 The Authors Journal compilation (c) 2007 Blackwell Publishing Ltd.

More than Just Contrarians: Insider Trading in Glamour and Value Firms

“…But Jenter (2005) concludes that long-run excess returns, after controlling for size and book-to-market effects, are indistinguishable from zero. These somewhat mixed findings on the stock market response to corporate insider transactions in the USA are in contrast to the UK and other countries where studies have shown there are significant short-run and long-run abnormal returns to directors' trading (Gregory et al, 1997;Friederich et al, 2002;Bris, 2005;Fidrmuc et al, 2006;Betzer and Theissen, 2009). Fidrmuc et al (2006) explain the greater short-run informativeness of UK directors' trades in terms of the regulatory differences between the two markets, because prior to 2002 the required disclosure of insider trades to the market was faster in the UK.…”

The Returns to Hedge Fund Activism in Germany

“…Anecdotal evidence suggests that traders circulate target lists and that firms are often ‘in play’ long before an activist investor reveals his identity. Third, longer run‐up periods in Germany could also be due to insider trading, which is facilitated by a disclosure regime that is less strict and not as effectively enforced as in the USA (Betzer and Theissen, ). Fourth, observing that most hedge funds do not target undervalued stocks (see Section 4.1.1), their investment strategies could be driven by objectives such as market timing or capturing price and earnings momentum.…”

Time‐Varying Liquidity Trading, Private Information and Insider Trading

“…Chordia et al (2001) also argue that earnings announcements are among the best candidates for scheduled announcements that involve a release of relevant pricing information. 5 See Sivakumar and Waymire (1994), Ke et al (2003), Roulstone (2006), Betzer and Theissen (2009) and others for insider trading around earnings announcements. Also refer to Keown and Pinkerton (1981), Jarrell and Poulsen (1989), Meulbroek (1992), Cornell and Sirri (1992), Eyssell and Arshadi (1993) and others for insider trading around mergers and acquisitions.…”