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
- 4 Conclusion
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This master's thesis aims to investigate directors' dealings in Germany. The study explores the theoretical and legal frameworks surrounding such transactions, reviews existing literature, and conducts an empirical analysis to examine the impact of these dealings on market returns.
- Theoretical foundations of directors' dealings
- International legal regulations concerning directors' dealings
- Empirical analysis of market reactions to directors' transactions
- Univariate and multivariate statistical analysis of market data
- Assessment of the efficiency of the German regulatory framework
Zusammenfassung der Kapitel (Chapter Summaries)
1 Introduction: This introductory chapter sets the stage for the thesis, outlining the significance of directors' dealings in corporate governance and the German market context. It introduces the research question and objectives, highlighting the gaps in existing literature that the study seeks to address. The chapter also provides a brief overview of the thesis structure and methodology.
2 Theoretical background: This chapter lays the groundwork for the empirical investigation by exploring the theoretical and conceptual foundations of directors' dealings. It delves into agency theory, information asymmetry, and the role of corporate governance in mitigating conflicts of interest. Furthermore, this chapter provides a comprehensive overview of the international development of legal regulations concerning insider trading and directors' transactions, setting the stage for a focused examination of the German legal landscape. The chapter concludes with a detailed review of relevant academic literature, highlighting existing research and identifying areas needing further investigation.
3 Empirical investigation: This chapter presents the core empirical findings of the thesis. It begins with a detailed description of the data selection process and the descriptive statistics of the dataset used in the analysis. Hypotheses are formulated based on the theoretical framework established in the previous chapter. The chapter then employs both univariate and multivariate analyses to assess the impact of directors' dealings on market returns, utilizing methodologies such as event studies and regression analysis. Results are meticulously presented and discussed, focusing on both transaction day and reporting day effects. The findings shed light on the efficacy of the German regulatory framework and highlight potential areas for improvement.
Schlüsselwörter (Keywords)
Directors' dealings, corporate governance, German capital market, insider trading, market efficiency, event study, regression analysis, regulatory framework, information asymmetry, agency theory.
Frequently Asked Questions: Master's Thesis on Directors' Dealings in Germany
What is the main topic of this master's thesis?
This master's thesis investigates directors' dealings in Germany, exploring the theoretical and legal frameworks, reviewing existing literature, and empirically analyzing the impact of these dealings on market returns.
What are the key objectives of this research?
The study aims to examine the theoretical foundations of directors' dealings, analyze international legal regulations, empirically analyze market reactions to directors' transactions using univariate and multivariate statistical methods, and assess the efficiency of the German regulatory framework.
What theoretical frameworks are used in this thesis?
The thesis utilizes agency theory and information asymmetry to understand the conflicts of interest inherent in directors' dealings and the role of corporate governance in mitigating them.
What is the methodology employed in the empirical investigation?
The empirical investigation uses both univariate and multivariate analyses. Univariate analysis includes descriptive statistics, hypotheses development, and an event study examining transaction and reporting day effects. Multivariate analysis employs regression models to further investigate the relationships between directors' dealings and market returns.
What kind of data is analyzed in this study?
The study uses market data to analyze the impact of directors' dealings on market returns. The specific data selection process and descriptive statistics are detailed in Chapter 3.
What are the key findings of the empirical analysis?
The core empirical findings are presented in Chapter 3, focusing on the results of both univariate and multivariate analyses. The findings shed light on the efficacy of the German regulatory framework and highlight potential areas for improvement. Specific results regarding transaction day and reporting day effects are discussed.
How does this thesis contribute to existing literature?
The thesis contributes by addressing gaps in existing literature on directors' dealings in the German context. It provides a comprehensive analysis combining theoretical frameworks, legal considerations, and empirical evidence. Chapter 2 includes a detailed literature review highlighting existing research and identifying areas for further investigation.
What is the structure of the thesis?
The thesis is structured into four chapters: an introduction, a theoretical background chapter, an empirical investigation chapter, and a conclusion. The table of contents provides a detailed breakdown of the sub-sections within each chapter.
What are the key words associated with this thesis?
Key words include: Directors' dealings, corporate governance, German capital market, insider trading, market efficiency, event study, regression analysis, regulatory framework, information asymmetry, and agency theory.
What is the overall conclusion of the thesis?
The concluding chapter (Chapter 4) summarizes the key findings and discusses their implications for corporate governance, market regulation, and future research. It assesses the efficiency of the German regulatory framework in light of the empirical findings.
- Quote paper
- Daniel Becker (Author), 2016, Directors' Dealings in Germany, Munich, GRIN Verlag, https://www.grin.com/document/499616
