Insider Trading and Corporate Governance: The Case of Germany

Abstract: We analyze transactions by corporate insiders in Germany. We find that insider trades are associated with significant abnormal returns. Insider trades that occur prior to an earnings an-nouncement have a larger impact on prices. This result provides a rationale for the UK regulation that prohibits insiders from trading prior to earnings announcements. Both the ownership structure and the accounting standards used by the firm affect the magnitude of the price reaction. The posi-tion of the insider within the firm has no effect, which is inconsistent with the informational hierar-chy hypothesis,. JEL classification: G14, G30, G3