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Insider Trading and the Market Abuse Directive: Are Voluntary and Mandatory Takeover Bids Different?

Riccardo Ferretti (), Pierpaolo Pattitoni () and Roberto Patuelli ()
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Riccardo Ferretti: University of Modena and Reggio Emilia

Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, 2021, vol. 7, issue 3, No 6, 485 pages

Abstract: Abstract This study analyzes the effectiveness of the Market Abuse Directive (MAD) in reducing possible profits from insider trading during takeover bids. 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 produce effects, for mandatory offers, on the magnitude of abnormal returns and volumes noted before their announcement. Instead, we find no effect for voluntary offers, which prove to be intrinsically different from the latter ones. Multivariate econometric analyses based on regression and matching methods confirm this result. We interpret our results in light of the choice problem of the optimal amount of insider trading, based on the comparison of marginal costs and benefits of the illegal activity, after considering the differences between voluntary and mandatory offers.

Keywords: Market abuse directive; Takeover bids; Event study (search for similar items in EconPapers)
JEL-codes: G14 G34 K2 K4 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s40797-019-00114-y

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