Empirical Evidence on the Impact of European Insider Trading Regulations

Between 1988 and 1994 ten European countries introduced or modified their regulations on insider trading. We evaluate in this article the impact of such regulatory changes on the risk, return, and some other characteristics of these ten markets. After extensive testing, we find that the evidence suggests that these regulations have had little (if any) impact on the market characteristics we examine, and briefly speculate about the reasons that justify our findings. * We would like to thank Tom Berglund, Dirk Heremans, Rich Kihlstrom, Lin Pu, Clas Wihlborg, participants of seminars at Gothenburg University (Gothenburg, Sweden), Torcuato Di Tella University (Buenos Aires, Argentina), and K.U. Leuven (Leuven, Belgium), and participants of the 12th Annual Meeting of the European Association of Law and Economics (Gerzensee, Switzerland), the 13th International Conference of the French Finance Association (Geneva, Switzerland), and the 5th Conference of the European Financial Management Association (Innsbruck, Austria) for helpful comments and suggestions. We are also indebted to Eirik Bunaes, Corrado Conti, Michael Kremsner, C. Lempereur, Frédéric Perier, and Georg Wittich for helpful information regarding European insider trading regulations. Finally, we are indebted to Eudald Canadell for providing helpful contacts. The views expressed below and any errors that may remain are entirely our own. ** Corresponding author: Javier Estrada / IESE / Avda. Pearson 21 / 08034 Barcelona / Spain TEL: (34-93) 253-4200 / FAX: (34-93) 253-4343 / EMAIL: [email protected]