Insider trading in Germany: Do corporate insiders exploit inside information?

Arbeitspapier

Our study analyzes a large sample of transactions carried out by corporate insiders reported to the German regulatory authority BaFin in the period July 1, 2002 to April 30, 2005 employing event study methodology. In particular, we focus on the question whether corporate insiders exploit inside information while trading in their company's stock. Therefore we use a distinct property of German law, i.e. company's obligation to reveal inside information through ad-hoc news disclosures, to link trading of insiders to their foreknowledge of important corporate news. We find strong evidence that insiders exploit inside information as they earn above average profits by front-running on subsequent news disclosures. Furthermore, looking at the type of insider, we find that members of the supervisory board (directors) and the group of other insiders (basically family members of senior managers and directors) profit substantially from exploiting inside information. In contrast, members of the executive board (senior managers) can be largely exculpated from exploiting inside information as they realize below average returns with their rare front-running transactions.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tübinger Diskussionsbeiträge ; No. 309

Classification and Topics

• Classification: Wirtschaft ; Portfolio Choice; Investment Decisions ; Information and Market Efficiency; Event Studies; Insider Trading ; Corporate Finance and Governance: General
• Subject: insider trading ; inside information ; German stock market ; regulation of financial markets ; Insiderhandel ; Kapitalmarktrecht ; Führungskräfte ; Familie ; Insiderrecht ; Deutschland

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dymke, Björn M. ; Walter, Andreas
• Event: Veröffentlichung
• (who): Eberhard Karls Universität Tübingen, Wirtschaftswissenschaftliche Fakultät
• (where): Tübingen
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/40300
• URN: urn:nbn:de:bsz:21-opus-27380
• Last update: 10.03.2025, 11:44 AM CET