Testing for the Insider Trading Prior to the Significant Corporate Events

Abstract

Vladislav Vladimirovich Petrov - National Research University The Higher School of Economics.

E-mail: petrovv41091@gmail.com

This article presents the results of a study of insider trading prior to the significant corporate events of the Russian public companies in 2005–2015. The study is based on an analysis of cumulative abnormal returns (ACAR) and abnormal trading volumes (AAV) during the period prior to the announcement of such events as announcements of M&As, SPOs, special dividend payments and delistigs of the stocks.

The research detected the insider trading symptoms prior to the announcements of M&As, special dividend payments and delistigs of the stocks. We have found the positive ACAR and AAV prior to the announcement of the events. The numbers grew as long as the day of event came closer and reached its peak in a day before the announcement. The symptoms of a large insider trading prior to the announcement of SPOs were not detected.

The comparison of insider trading scales in Russia and US showed the 2 times excess of insider trading scale in the Russia stock market. Furthermore, the tightening of legislation did not lead to the desired result: the insider trading scale decreased slightly.