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Insider Trading, News Releases, and Ownership Concentration


  • Jana p. Fidrmuc is at the University of Warwick and Erasmus University Rotterdam, Marc Goergen is at University of Sheffield Management School and European Corporate Governance Institute (ECGI), and Luc Renneboog is at Tilburg University, TILEC, and ECGI. We thank the participants at the Second Forum on Corporate Governance organized by Humboldt University and Stanford University in Berlin (2003), the 2003 Workshop on Corporate Governance at the University of Vienna, the 2002 European Finance Association annual meetings in Berlin, the 2003 EEA/ESEM annual meetings in Stockholm, the 2004 IFS Frankfurt Summer School, and the 2004 IPEG Conference on Managerial Remuneration at the University of Manchester for very helpful comments and suggestions. We are also grateful to the participants at seminars at HEC (Paris), CUNEF (Madrid), Tilburg University, and Erasmus University. We are particularly indebted to the editor Robert F. Stambaugh, Marco Becht, Arturo Bris, Robert Bushman, Johanna Federmütze, Uli Hege, Rez Kabir, Fred Palomino, Joachim Schwalbach, Henri Servaes, Myron Slovin, Marie Sushka, Greg Trojanowski, Chris Veld, Martin Walker, and an anonymous referee for suggestions that have helped to improve this paper.


This paper investigates the market's reaction to U.K. insider transactions and analyzes whether the reaction depends on the firm's ownership. We present three major findings. First, differences in regulation between the U.K. and United States, in particular the speedier reporting of trades in the U.K., may explain the observed larger abnormal returns in the U.K. Second, ownership by directors and outside shareholders has an impact on the abnormal returns. Third, it is important to adjust for news released before directors' trades. In particular, trades preceded by news on mergers and acquisitions and CEO replacements contain significantly less information.