According to Stützel (1960), insider transactions are comparable with roulette, where corporate insiders – in contrast with regular players – have the privilege to place their chips after the ball begins to rest. In other words, certainly, the outcome of the game is well known to corporate insiders. Apart from that, focusing on capital market transactions, are corporate insiders turned out to be winners?
Due to their closeness to the business, it is said that corporate insiders possess firm-specific, non-public, and value-relevant information. Various international empirical findings support that they are able to exploit their information advantage towards market participants, so-called outsiders. Additionally, corporate insiders represent anti-cyclical abilities and they are also capable to realize price discrepancies deviating from the firm’s intrinsic value.
Is there an opportunity for market participants to benefit as well? Because of legal leeway and a lag in technical transmission, typically, outsiders are informed later about transactions in own company stocks by insiders. However, referring to existing literature, predominantly, they also benefit by imitating transactions after public announcement as long as transaction costs are ignored. Thus, capital market efficiency is violated.
Of course, this link is recognized. For instance, in 2006, in cooperation with the FIFAM Research Institute for Asset Management, Handelsblatt, and the Technical University of Aachen, the Commerzbank published an insider trend barometer displaying the ratio from purchases to sales every two weeks (Handelsblatt, 2016). Furthermore, the Commerzbank issued a certificate containing companies of the DAX30 associated with directors’ dealings (Commerzbank, 2006).
In comparison with established nations like the USA or the UK, Germany looks back on a brief history regulating insider trading; therefore, research activities are manageable. While one strand of literature concentrates on performance effects for insiders, the other strand analyzes performance effects for outsiders.
This thesis examines directors’ dealings in two ways.
Inhaltsverzeichnis (Table of Contents)
- 1 Introduction
- 2 Theoretical background
- 2.1 Theoretical and conceptual foundations
- 2.2 International development of legal regulations
- 2.3 Literature review
- 3 Empirical investigation
- 3.1 Univariate analyses
- 3.1.1 Data selection and descriptive statistics
- 3.1.2 Hypotheses development
- 3.1.3 Conception of an event study
- 3.1.4 Differentiated results for the transaction day
- 3.1.5 Differentiated results for the reporting day
- 3.2 Multivariate analysis
- 3.2.1 Regression model
- 3.2.2 Results and discussion
- 3.1 Univariate analyses
- 4 Conclusion
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This master thesis examines the dealings of directors in Germany and aims to analyze the impact of their transactions on stock prices. The study explores the international development of legal regulations surrounding insider trading and examines the empirical evidence from German companies.
- The impact of directors' transactions on stock prices.
- The effectiveness of legal regulations in preventing insider trading.
- The role of corporate governance in mitigating insider trading risks.
- The application of event study methodology to analyze stock price reactions.
- The implications of the findings for investors and policymakers.
Zusammenfassung der Kapitel (Chapter Summaries)
- Chapter 1: Introduction This chapter provides an overview of the research topic, outlining the significance and relevance of the study. It sets the stage for the investigation by defining the key concepts and identifying the research questions to be addressed.
- Chapter 2: Theoretical background This chapter presents the theoretical and conceptual foundations of the study, providing a comprehensive understanding of the legal framework surrounding insider trading and the relevant literature on the topic. It explores the international development of legal regulations and reviews existing research on the impact of directors' dealings on stock prices.
- Chapter 3: Empirical investigation This chapter presents the empirical investigation conducted for this master thesis. It outlines the data selection process, describes the methodology used for data analysis, and presents the results of both univariate and multivariate analyses. This chapter explores the relationship between directors' transactions and stock price movements in German companies.
Schlüsselwörter (Keywords)
This master thesis focuses on directors' dealings, insider trading, event studies, stock prices, corporate governance, German law, and empirical research. The study utilizes statistical analysis and econometric methods to investigate the impact of insider transactions on stock market behavior.
- Quote paper
- Daniel Becker (Author), 2016, Directors' Dealings in Germany, Munich, GRIN Verlag, https://www.grin.com/document/499616
